Novation is the extinguishment of an obligation by creating a new one that replaces it, either by changing its object or principal conditions, by substituting the person of the debtor, or by subrogating a third person in the rights of the creditor. It has a dual function: it extinguishes the old obligation and creates a new one in its place. Novation may be objective (changing the object or principal conditions), subjective by change of debtor (which may be by delegacion, with the creditor's consent, or expromision, where a third person assumes the debt), or subjective by change of creditor (subrogation). Novation may be express (the parties clearly declare it) or implied (the old and new obligations are incompatible on every essential point). A key requirement is that the intent to novate must be clear; novation is never presumed. Mere modifications that do not change the essence of the obligation (like extending the period or increasing a minor term) do not amount to novation. When there is valid novation, the old obligation and its accessory obligations are generally extinguished, unless the parties stipulate otherwise. Understanding novation matters because it determines whether the old debt still exists or has been replaced.
What Novation Is
Novation extinguishes an obligation by creating a new one that replaces it — by changing its object/conditions, substituting the debtor, or subrogating the creditor.
Kinds
- Objective — change of object or principal conditions;
- Change of debtor — delegacion (with creditor consent) or expromision (a third person assumes the debt); and
- Change of creditor — subrogation.
Clear Intent Required
Novation may be express or implied (old and new obligations incompatible on every essential point). The intent to novate must be clear — novation is never presumed. Minor modifications are not novation.
Practical Takeaways
- Novation replaces an old obligation with a new one;
- It can change the object, debtor, or creditor;
- The intent must be clear — minor changes don't novate.
Frequently Asked Questions
What is novation? The extinguishment of an obligation by creating a new one that replaces it, by changing its object or principal conditions, substituting the debtor, or subrogating a new creditor.
What are the kinds of novation? Objective (changing the object or conditions), subjective by change of debtor (delegacion with creditor consent, or expromision), and subjective by change of creditor (subrogation).
Is novation presumed? No. Novation is never presumed. The intent to novate must be clear, whether express or implied from the total incompatibility of the old and new obligations on every essential point.
Do minor changes to a contract count as novation? No. Mere modifications that do not change the essence of the obligation, such as extending the period or altering a minor term, do not amount to novation.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
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