Novation occurs when you terminate one contractual obligation and replaced a new one for it. Novation is the replacement of one of the parties in a two-party agreement with the consent of the other two parties. To novate is to take on a new commitment in place of an old one.
For instance, a supplier looking to part ways with a commercial client might identify a replacement. The contract may be annulled and replaced, with the sole exception of the supplier's name, if all three parties concur. All rights and duties under the contract are transferred to the new supplier by the outgoing supplier.
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