Novation Agreement

A novation agreement is a contract between three parties, in which one party (the "obligor") agrees to assume the contractual obligations of another party (the "obligee"). The third party (the "novator") agrees to release the obligee from its obligations under the contract. Novation agreements are typically used in business transactions, when a company wants to transfer its contractual obligations to another company. Novation agreements are also used in real estate transactions. For example, if a buyer wants to purchase a property from a seller, but the seller has a mortgage on the property, the buyer may ask the lender to agree to a novation agreement. In this case, the buyer would assume the seller's obligations under the mortgage, and the lender would release the seller from the mortgage.