What is a novation of a contract?

Novation of a contract is a way for the parties in a contract to make a change or swap with another party without voiding or invalidating the entire contract. In Texas, a novation is when a party to the original contract is replaced by a new party, and the new party assumes the rights and obligations of the original party. This usually happens if the original party is no longer able to perform their obligations under the contract, or wants to be replaced with a third-party who is better suited to fulfill the contract. When novation occurs, the original contract remains valid, and the rights and obligations of the original party are transferred to the new party. In addition, the parties to the contract must agree to the novation, and the other non-signatory parties must also agree. For example, if the original contract involved two parties, and a third party now wants to assume the rights and obligations of one of the original parties, then all three parties must agree to the novation. Once the novation is agreed upon, the new party must now fulfill all the duties and obligations of the original party, and in turn, is given the same rights and responsibilities. This allows the original contract to continue without disruption, and can provide a beneficial outcome for all involved parties.

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