Novation - Definition - Law Dictionary Home Dictionary Definition novation

Definition :

Novation, the substitution, with the creditor's consent, of a new debtor for an old one. The cases on novation between a customer and a firm will be found discussed in Lindley on Partnership. Slight evidence is sufficient to show that a creditor who continue his dealings with in coming partners accepts the new firm as his debtors instead of the old firm, see Smith v. Patrick, 1901 AC 282. Even in the case of an amalgamation of companies there is nothing to prevent novation if established by sufficient evidence. Many such cases arose in the winding-up of the Albert Company and the European Company, which will be found collected in Buckley on Companies.

Substitution of a new contract is the core of novation. If the new contract suffers from legal flaw such as want of registration, stamps etc., on account of which it becomes unenforceable, the original contract will not be extinguished and there would be no novation, Vishram Arjun v. Irukulla Shankariah, AIR 1957 AP 784.