Novation is the substitution of a new in the place of an old contract, sec 852.

A new contract is essential to novation, sec 853.

Consent of the creditor is essential, sec 854.

And so of consent of other parties, sec 855.

To novation points of change are immaterial, sec 856.

Whether old agreement is extinguished depends on construction, sec 857.

Must be consideration for agreement of substitution, sec 858.

Only parties to a contract may sue or be sued on it, sec 859. Extinguishment may be by merger, sec 860. Novation may be proved by parol, sec

861. Novation applied to partnership, sec .

862. Retiring partners not discharged by acceptance of new firm, sec 863. Insurance may devolve duties on assignee, sec 864. Novation within statute of frauds,sec .

865.

Sec 852

Novation is the substitution of a new in the place of an old contract. The novation of a contract is distinguished from the rectification of a contract in this, that in rectification the old contract is restored by a correction of mistakes of expression, while in novation a new contract is created.1 The efficacy of novation is primarily due to the action of the creditor. The creditor consents to the rescission of the old contract and the substitution of a new contract. Novation is to be distinguished, therefore, from release,2 in the fact that it works not the termination of the contractual relation, but a substitution of contracts; while it differs from rectification in the fact that the change it produces is not partial, but total. In every respect the new agreement starts fresh. It is not part old and part new. It is new throughout, and the obligations it creates emanate, as to time and place, from itself. So far as concerns our own distinctive law, any increment of security, passing from one party to another, no matter how slight, and no matter how largely it may be apparently overweighed by surrenders on the other side, will be sufficient to sustain the substitution.1 - Whether the novation is so far perfected as to relieve the original debtor depends in part on the terms of the first agreement, in part on those of the second. It may be that by the first agreement the original debtor is to be bound only as long as he retains certain property or bears certain relations to the original creditor; and if so there is a release of the original debtor on the happening of the contingency on which his indebtedness is to cease. Or it may be that by the second agreement the original debtor is expressly released. But in any view, novation, in its true sense, does not exist unless the old agreement is discharged and a new agreement executed to take its place.2

Novation is the substitution of a new in the place of an old contract.

1 Dig. 46, 2 Cod. 8, 42 de nova. et deleg. Several German treatises have appeared on this topic: Gneist, die for-mellen Vertrage (1845); Fein, Beitrage zu der Lehre von der Novation und Delegation (1855); Kniess, Einfluss der be-dingten Novation auf die ursprungliche Obligation (1860); Romer, die bedingte Novation (1863); Salpius, Novation und Delegation (1864); Salkowski, zur Lehre von der Novation (1866). It is discussed also by Vangerow, sec 619, and Windscheid, sec 353, on whom I chiefly rely for the distinctions in the text. An article on the topic in the text will be found in 3 Am. Law Reg. N. S. 65. Rectification, as distinguished from novation, is discussed supra, sec 205.

2 Infra, sec 1031.

1 Supra, sec 516 et seq.; infra, sec 853; Leake, 2d ed. 790. See comments by Lord Westbury in Blundell's case, reported in 7 London Law J. 772.

2 "There may be in some cases a change of credit by agreement between the parties so as to transfer the liability from the original contracting party to another, or to one only of the original contracting parties." Ch. on Pl. 16th Am. ed. 55, citing Evans V. Drummond, 4 Esp. 91; Tappen V. Martens, 8 T. R. 451; Gouthwaite V. Duckworth, 12 East, 421.

That by consent of all parties the old agreement may be extinguished and a new agreement instituted in its place, see Wilson V. Coupland, 5 B. & Al. 228; Evans V. Powis, 1 Exch. 601; Sard V. Rhodes, 1 M. & W. 153; Good V. Cheeseman, 2 B. & Ad. 328; Jenness V. Lane, 26 Me. 475; Woodward V. Miles, 24 N. H. 289; Babcock V. Hawkins, 23 Vt. 561; Andrews V. Camp-beU, 36 Oh. St. 361; Flanagin V. Ham-bleton, 54 Ind. 222; Lister V. Clark, 48 Iowa, 169; Drake V. Hill, 53 Iowa, 37; Shaffer V. McKanna, 24 Kan. 22; Baker V. Frellson, 32 La. An. 822. See Morriss V. Harveys, 75 Va. 726; and cases cited infra, sec 853, 996, and see Story Eq. Jur. sec 1355.

In Wharton V. Walker, 4 B. & C. 164, Bayley, J., in a case of alleged substitution of a new debtor for an old, said: "If, by an agreement between the three parties, the plaintiff had undertaken to look to the defendant and not to his original debtor, that would have been binding, and the plaintiff might have maintained an action on the agreement; but in order to A new contract essential to novation.