What is the definition of novation in contract law?

Novation in contract law specifically refers to the act of replacing an original party to a contract with a new party, thereby establishing a new contractual relationship. This process requires the consent of all parties involved— the original parties and the new party. By substituting one of the original parties, the obligations and rights of the contract are transferred to the new party, effectively releasing the original party from any further liabilities under that contract.

In contrast, modifying an existing contract simply alters some terms of the agreement between the original parties, while termination ends the contract entirely without negotiation with a new party. Dispute resolution refers to mechanisms for addressing conflicts arising from a contract but does not involve the change of the parties themselves.

The definition of novation captures its essence as a specific type of contract modification where a new party takes the place of an old one, thereby creating a completely new obligation, distinct from various other contract management processes.