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3 Law Soc'y J. 34 (1930-1931)
Novation

handle is hein.journals/lsocyjo3 and id is 36 raw text is: Novation By EDWARD M. DANGEL DEFINITIONS Novation is the substitution of a new contractual obligation for an old one, which is thereby extinguished. Novation is the substitution of a new obligation in lieu of an old one, the effect of which is to pay, dissolve or otherwise discharge the old one. Novation of a debt arises when a new contract is entered into with intent to dissolve a former engagement, or when a new debt is substituted for an old one. Novation means that, there being a contract in existence, some new con- tract is substituted for it, either between the same parties or different parties, the consideration mutually being the discharge of the old contract. Novation implies the substitution of a debtor, or a creditor, or obligation and a new contract. KINDS Novation takes place either by substitution of a new for an old party, by substitution of a new agreement between the old parties, or it may be by a change of parties and the agreement at the same time. Because the substitution may be in the obligation or the parties, there have arisen four kinds of novation: A. Substitution of New Debtor in Place of Old One, With Intent to Release the Latter. A novation by the substitution of a new debtor consists of a mutual agreement among three parties, the creditor, his immediate debtor, and the intended new debtor, whereby the liability of the last named is accepted in place of that of the original debtor in discharge of the original debt. This kind of a novation exists where there is a substitution of the new debtor with the intention to release the old one. The substitution of one debtor by mutual agreement for another, whereby the old debt is extinguished. To constitute this kind of novation it must clearly appear that another person becomes a debtor instead of a former debtor, who is so accepted by the creditor who thereupon discharges the first debtor. The mere taking of a new debtor will not, standing alone, amount to a novation. There must be an extinguishment of the old debt and an agreement to look to the new debtor alone. The essence of this kind of novation is that all three parties assent to or concur in the agreement whereby the new debtor is substituted for the old and the old debt is extinguished. B. Substitution of New Creditor With Intent to Transfer Rights of Old Creditor to Him. The intervention or substitution of a new creditor for the original creditor with the consent of both-plus the debtor's promise to pay the new creditor, completes this kind of novation. Novation may be a transaction whereby a debtor is discharged from his liability to his original creditor by contracting a new obligation in favor of a new creditor by the order of the original creditor. Such novation takes place by the intervention of a new creditor, where the debtor, for the purpose of being discharged from liability to his original creditor, by the order of that original creditor, contracts a new obligation in favor of the new creditor, it has all the elements of a novation of a debt, and hence is equivalent to the payment of the original debt. To constitute a novation by substitution of creditors, there must be a mutual agreement between three or more persons, whereby a debtor, in con- sideration of being discharged from his liability to the original creditor, con- tracts a new obligation in favor of a new creditor, and the new creditor must have consented to the discharge of his original debtor and have accepted the new debtor.

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