What is the effect of a novation of a contract?

Novation of a contract is a process whereby a contract is altered or replaced by a new one. In California, novation of a contract has the same effect as if the contract had been cancelled and a new one created from scratch. The novation replaces an existing contract with an entirely new one. By novating a contract, a party is released from the original agreement, and all associated liabilities, allowing them to enter into a new agreement with potentially different terms. For example, if two parties agree to novate their contract, the novation would allow them to reduce the quantity of goods to be delivered under the contract. Each party to the original contract must agree to the novation in order for it to be valid. If the novation is not agreed to, the original contract will remain in effect. In general, the novation of a contract creates a new set of obligations between the parties. The terms of the contract can be changed by either party, as long as both parties agree. It is important to note that, even with a novation, the parties remain responsible for any contractual breaches that occurred before the novation.

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