California Business Practice- April 2014

Sunday, October 11, 2009

Assignment vs. Novation

Hey Everyone! I am wondering if anyone can explain the difference between an assignment and an novation. I'd really appreciate it! Thanks and good luck studying!
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3 comments:

  1. Katie LeporeOctober 11, 2009 at 2:43 PM

    I think it's actually a novation and I'm not entirely sure but from what I gather, in assignment, you give your rights away to a third party. In a novation, a third party is substituted directly into the original contract.

    Here's what the book says:
    An assignment is the transfer of rights under a contract to a third party.

    Sometimes parties to the agreement wish to replace one of the parties with a 3rd party. This substitution is called a novation. The original duties remain the same under the contract, but one party is discharged and the third party now takes the original party’s place. All three parties must agree to the novation in order for it to be valid.

    Hope that helps some, though I'm not entirely sure myself...

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  2. RitaOctober 11, 2009 at 6:22 PM

    Hi Katie,

    After reviewing more of my notes I saw "novation" and realized that ovation probably doesn't exist. I also came across that same definition but am unsure what kind of question can be asked in regards to assignments vs. novation.

    I was thinking that we'll probably have to determine the assignment of those rights to the 3rd party and how they can be carried out (performed). Not entirely sure either. Thanks so much for your reply though!

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  3. CustinBusinessLaw@USDOctober 11, 2009 at 8:11 PM

    A novation is: a substitution of a new obligation for an old one. An assignment is merely a transfer of rights. The significance of this difference is that performance is excused under the initial agreement in the case of a novation.

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