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Novation is a term used in contract law and business law to describe the act of either replacing an obligation to perform with a new obligation, or replacing a party to an agreement with a new party. A novation must be agreed upon by all original parties to the original agreement.

Novation is also used in futures/options trading markets to describe a special situation where the clearing house takes all positions with all the brokers, buying all the brokers sell, and selling all that the brokers buy.

In business, novation is typically the process by which a newly formed corporation assumes the pre-incorporation liabilities incurred by its founders.


This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Novation".