A novation is a contract that substitutes one party to a preexisting contract for a party who was not in the original contract.
When a party enters into a contract to do something for another party, the performing party may delegate its duty to perform to another party.
For example: B enters into a contract with C for B to paint C’s house for $500.
B then enters into a separate contract with C and D for D to paint C’s house and to discharge its duties to C. In order to have a valid novation, the party asserting it must show that: 1. All of the parties affected by the new contract must agree to the new contract; 3.
Another example of legal assignment is upon death, where the executor assumes the position of the deceased and to whom all contracts of the deceased are assigned.
The criteria for a successful novation is the complete acceptance of the liability by the new debtor, the acceptance of the new debtor by the creditor, and the acceptance by the outgoing creditor of the new contract as full performance of the old contract.
However, the original performing party will still be liable for breach of contract if the party it has delegated its duties to does not perform.
This problem can be avoided by something called a “novation".
For example, if you hire a special performer, the performer cannot assign the contract to another performer.
If an assignment creates a new or special burden to the other original contracting party, it may also be prohibited.