Texas Real Estate Sales Agent ExamContractsHard
A tenant has a one-year lease agreement for an apartment. Three months into the lease, the tenant's employer relocates them to another city. The tenant finds a suitable replacement to take over the remainder of the lease, and the landlord agrees to release the original tenant from all future obligations, substituting the new tenant in their place. This legal action is known as what?
- ANovation
- BSubletting
- CSurrender
- DAssignment
Show answer & explanationAnswer & explanation
Correct answer: A. Novation
Novation is the substitution of a new contract for an old one, or the substitution of a new party to an existing obligation. In this scenario, the original tenant is completely released, and a new tenant takes their place with the landlord's agreement, establishing a new contractual relationship.
Why the other options are wrong
- B. Subletting involves the original tenant leasing a portion or all of the premises to a subtenant, but the original tenant remains primarily liable to the landlord.
- C. Surrender is the mutual agreement between landlord and tenant to terminate the lease early, not necessarily replacing the tenant.
- D. Assignment involves the original tenant transferring all their rights and obligations to a new tenant, but the original tenant often remains secondarily liable to the landlord.
Novation (Contracts)
The substitution of a new contract for an old one, or the substitution of a new party for an old one in an existing contract, with the consent of all parties involved. This completely releases the original party from their obligations.
- Replaces an old contract with a new one
- Substitutes a new party for an old one
- Requires agreement of all parties
- Original party is fully released
Memory trick: Novation is a total new creation, no old obligations.