What is the result of a contract being novated?

What is the result of a contract being novated?

• A. The original party remains liable
• B. All parties are released from obligations
• C. The original party is released from obligations
• D. None of the parties are obligated

Answer: (C)

When a contract is novated, it involves the substitution of one party for another in the contractual obligations. The original party is released from its obligations under the contract, allowing a new party to assume those responsibilities. This key feature of novation differentiates it from other forms of contract modification, where original parties may still retain some liabilities. Essentially, novation transfers the rights and duties from the original party to a new party while simultaneously relieving the original party from any future obligations. This is often used in scenarios such as when a business sells its interests or when an individual transfers their contract to another party. By releasing the original party from obligations, novation ensures that they are not held liable for any performance or breach of contract moving forward.

When a contract is novated, it involves the substitution of one party for another in the contractual obligations. The original party is released from its obligations under the contract, allowing a new party to assume those responsibilities. This key feature of novation differentiates it from other forms of contract modification, where original parties may still retain some liabilities. Essentially, novation transfers the rights and duties from the original party to a new party while simultaneously relieving the original party from any future obligations. This is often used in scenarios such as when a business sells its interests or when an individual transfers their contract to another party. By releasing the original party from obligations, novation ensures that they are not held liable for any performance or breach of contract moving forward.