What happens under a Novation agreement?

A novation agreement involves the substitution of one party in a contract, where a third party assumes the rights and obligations of the original party. Essentially, this means that the original party is replaced in the contract, transferring both the benefits and the liabilities to the new party. This process requires the consent of all parties involved, including the original party, the new party, and the remaining party to the contract.

The key aspect of novation is that it not only transfers obligations but also the rights associated with the contract, creating a new contract where the original party is fully released from any future obligations. This is distinct from other arrangements, such as assignment, where the original party may still hold certain responsibilities despite transferring rights. Therefore, a novation creates a clean slate, allowing the new party to step into the original party's shoes without any encumbrances from the past contract.