What is the effect of a novation of a contract?

A novation of a contract is an agreement between the parties involved that transfers all rights, duties, and obligations from one party to another. In Virginia, a novation is a permissible way of revising a contract, but the parties must agree that the novation will be binding on them. When a novation is effected, the original contract is extinguished. This means that the parties must enter into a new contract and all obligations, rights, and liabilities must be transferred to the new parties. This can happen in multiple ways, such as when a new business buys out an old business and acquires all its obligations, when one party to a contract assigns its rights and obligations to a third party, or when parties agree to substitute a new contract in place of an existing one. In Virginia, a novation is valid only if the parties to the original contract sign the new agreement or if the original party transfers their rights and obligations to the third party in writing. A novation must be mutually agreed upon and consented to by both parties for it to be binding. In summary, a novation of a contract in Virginia will have the effect of transferring all rights, duties, and obligations from the original parties to the new parties. The parties must agree to the novation and sign either the new agreement or transfer their rights and obligations in writing for the novation to be valid.

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