Novation: NEW contract/party substituted — original party RELEASED
Before you read
Test yourself first: 5 questions
Question 1 of 5
Substituting a new party or contract for an existing one, releasing the original obligation, is:
Answer: A. Novation replaces a party/contract and releases the original obligor. Assignment transfers rights but may not release the original party.
Question 2 of 5
Assignment of a contract:
Answer: A. An assignment transfers rights (and often duties) to another party; unlike novation, it may not release the original party from liability.
Question 3 of 5
Assignment of a contract differs from novation in that an assignment:
Answer: B. In an assignment, the assignor transfers contract rights but usually stays secondarily liable; novation substitutes a new party and releases the original.
Question 4 of 5
A buyer assigns her rights under a purchase contract to a friend, but the contract contains no anti-assignment clause and is not personal in nature. The assignment is:
Answer: B. Most real estate purchase contracts are assignable unless prohibited; the assignment is valid, but the assignor usually stays liable absent a release or novation.
Question 5 of 5
A tenant with 8 months left transfers the full remaining term to a coworker, who pays rent directly to the landlord. The original tenant has made:
Answer: B. Transferring the ENTIRE remainder = ASSIGNMENT. The original tenant stays secondarily liable unless the landlord grants a release/novation. (Consent requirements depend on the lease — the question states no such clause.)
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- Assignment: transfer contract RIGHTS to someone else — original party STAYS liable
- Novation: NEW contract/party substituted — original party RELEASED
- Real estate contracts are assignable unless they say otherwise (or are personal-service)
- 'Subject to' financing = assignment flavor: seller still liable on the old loan
- Assumption WITH novation releases the seller
Assignment vs Novation: FAQs
Is Assignment vs Novation on the real estate exam?
Yes. Contracts & Transfer of Title is a scored domain on the real estate licensing exam, and this topic appears in the national portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
