MBE Rules · Contracts
Novation
Novation
The rule
A novation substitutes a new party for an original obligor by agreement of all three parties, discharging the original obligor entirely — mere delegation without creditor assent leaves the delegator liable.
In plain English
Novation is a legal process where a new party replaces an original party in a contract, and all three parties must agree to this change. This process fully releases the original party from their obligations, unlike a delegation, where the original party may still be held liable if the creditor does not agree.
Worked example
Alice has a contract with Bob to provide services, but she wants to transfer her obligations to Carol. All three parties agree to the novation, and Carol takes over the contract, releasing Alice from any further obligations. As a result, Alice is no longer liable for the contract.
Memory hook
Novation: New party, old party gone, all must agree!
The trap
Exams often confuse novation with delegation, leading students to mistakenly believe that a simple transfer of duties is sufficient to discharge the original obligor. Students should remember that creditor consent is crucial for a valid novation.
How examiners test it
Questions typically present a scenario involving a contract where one party wants to transfer their obligations, testing whether the transfer meets the requirements for novation or if it is merely a delegation.
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