California Real Estate SalespersonContractsHard
A buyer, seller, and broker agree to substitute a new buyer into an existing purchase agreement, with the seller releasing the original buyer from all further obligations and accepting the new buyer's performance instead. This type of agreement is known as:
- AAn assignment
- BAn accord and satisfaction
- CA novation
- DA rescission
Show answer & explanationAnswer & explanation
Correct answer: C. A novation
A novation substitutes a new party or new agreement for an old one, with the consent of all parties, and completely releases the original party from liability—unlike a simple assignment, which does not extinguish the original party's obligations.
Why the other options are wrong
- A. An assignment transfers rights/duties but does not automatically release the original party.
- B. Accord and satisfaction involves settling a dispute with a substituted performance, not substituting a party.
- D. Rescission cancels the contract and restores parties to their original position, not substitutes a party.
Novation
A contract modification, agreed to by all parties, that substitutes a new party or new obligation for an existing one and completely discharges the original party's liability.
- Requires consent of all original and new parties
- Fully releases original obligor, unlike assignment
- Common in real estate when a buyer is substituted
Memory trick: Novation = New person, old one is free