In simple words when both the parties agree to extinguish the original contract by substituting the new contract, it is known as novation of contract. Here the third party is responsible to replace the rights and obligations of the original contract and substitute a new contract. Now that we know what
novation of contract means, let us dig deeper into the novation of contact.
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Just like an organisation changes the clause and contracts in an agreement due to some small changes, so does the owner or buyer of the house. When we purchase a property we draft a title deed. Now, most of us opt for a mortgage loan to purchase a house. If this mortgage loan is transferred to a third party then the Novation Agreement must be signed. This is
what is novation of contract in real estate.
Now that we know what is novation of a contract let us learn a few points about novation.
What must be included in the novation agreement?
Effective Date- the date from which the novation is applicable to both parties
Release Clause- The clause specifying that the new contract should be effectively followed and the original contract has been released from its performance.
Representation clause- The clause must state representation and warranties that should be made by the party.
Fee- The fee required to contract the party should be mentioned.
This is what is novation of contract means in a nutshell. I hope you find this helpful.
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What is novation in real estate?
Amish
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2022-06-21T10:24:45+00:00 2022-07-04T10:04:01+00:00Comment
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