novation

Borrowed from Latin novātiō (“a renewing, rennovation”), from novō, from novus (“new”). Compare novel, novelty.

• IPA^(key): /noʊˈveɪʃən/

novation (countable and uncountable, plural novations)

1. (law) Replacement of a contract with one or more new contracts, in particular in financial markets the replacement of a contract between a particular buyer and seller with contracts between the clearing house and each party.
   • 1998, London Clearing House, submission to the U.S. Commodity Futures Trading Commission

     Netting by novation will occur immediately upon registration of the transaction in the SCM's name.

2. (law) A new contract between the original contracting parties whereby the first obligation is extinguished and a new obligation is substituted.

   An example of a novation is where an original debt which was payable in two instalments is novated to become payable in five installments.

• novate
• novatio