noun

novation

noh-VAY-shuhn

Novation (noun) means the replacement of a contract, or of one of the parties to it, by a new agreement that all parties consent to, so that the original obligations are extinguished. Example: “The lease was transferred by novation, releasing the outgoing tenant entirely.”

noun

legal The replacement of a contract, or of one of the parties to it, by a new agreement that all parties consent to, so that the original obligations are extinguished.

"The lease was transferred by novation, releasing the outgoing tenant entirely."

"Novation of the supply contract required the client's written consent."

technical In finance, the process by which a clearing house steps in between the two original parties to a trade and becomes the counterparty to each of them.

"Once the trade is accepted, novation makes the clearing house the buyer to every seller."

How to Use Novation

Learner’s notes

In plain EnglishSwapping in a new contract or a new party so the old obligations disappear.

When to use it

Legal and financial vocabulary; rare in everyday speech.

Memory tip

Note the spelling: novation has no 'in' at the front, unlike innovation, which is unrelated in meaning.

Trace the full origin ↓

Easily confused with

assignment → subcontracting innovation →

Common pairings

deed of novation novation agreement by way of novation novation of the contract

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The lease was transferred by _____, releasing the outgoing tenant entirely.

Etymology

From Latin novatio, 'a renewing', from novare, 'to make new', from novus, 'new'.

Origin: Latin

Synonyms

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substitution replacement of contract

Related Words

replacement switching substitution

Rhymes for novation

region billion ablation allusion emulsion ideation abortion abrasion diffusion elocution extension oxidation

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Frequently Asked Questions

What is the difference between novation and assignment?

Assignment transfers only the benefits of a contract, and the original party remains liable for its obligations. Novation replaces the contract entirely, so the outgoing party is released, and it requires the agreement of everyone involved.

Does novation need everyone's consent?

Yes. Because it discharges the old contract and creates a new one, all original parties and the incoming party must agree. This is the main practical difference from assignment, which the other side often cannot refuse.

Is novation the same as an amendment?

No. An amendment changes terms within an existing contract, while novation ends that contract and substitutes a fresh one, usually to swap in a different party.

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