§ 479. The term novation, which is borrowed from the Roman law, signifies the substitution, with the agreement of all parties concerned, of one debt for another, or of one party for another. By the Roman law the contract was only termed novatio, when between the same parties a new engagement was substituted for the old one; but where a new party was introduced and substituted for debtor or creditor, the contract bore the name of expromissio. The English term novation, which seems now to be coming in use, comprehends both forms.1
§ 480. There are two modes by which a novation of parties may take place. First, where, by agreement between all parties, a new debtor intervenes, and assumes the debt, in which case the old debtor is discharged; and second, where a new creditor intervenes to whom the same debtor agrees to pay the debt, in which case the new creditor acquires all the rights of the former creditor. In both of these cases the same rules of law apply; and the substituted contract completely extinguishes the previous one. Thus, "if A. owes B. £100, and B. owes C. £100, and the three meet and it is agreed between them that A. should pay C. the £100, B.'s debt is extinguished, and C. may recover that sum against A."2 So, also, where the defendant having purchased a wagon of the plaintiff sold it immediately afterwards to C, and all the parties having met together, it Was agreed between them that C. should pay to the plaintiff the price of the wagon, it was held that the debt due from the defendant to the plaintiff was thereby extinguished.3
1 As to novation the learned reader is referred to Foster v. Dawber- 6 Exch. 839; 3 Am. Law Reg. (n. s.) 65.
2 Tatlock v. Harris, 3 T. R. 180, per Mr. Justice Buller. 3Heaton v. Angier, 7 N. H. 397.
So, also, where the plaintiffs were creditors and the defendants were debtors to Taillasson & Co., and by consent of all parties an arrangement was made that the plaintiffs should take the defendants as their debtors instead of Taillasson & Co., it was held, that the plaintiffs were entitled to recover on a count for money had and received against the defendants, the original debt having been extinguished.1 So, if A. has a note against B. and C, and in satisfaction thereof takes a note from C. and D., and surrenders the old note, this is a novation.2
§ 481. This contract bears a strong affinity to an executed assignment with consent of the debtor; but in order to avoid the operation of the legal rule that a chose in action is not assignable so as to give the assignee a right of action in his own name, it is treated as a new contract, the consideration of which is the convenience resulting from the substitution of new parties,- the distinction being between the assignment of an old contract and the inception of a new one. In order, therefore, to constitute a strict novation, as the contract is understood in the civil and Roman law, it is necessary that there should be an express assent of all parties, an express promise and acceptance between the new parties, and an entire relinquishment of all claim on, or responsibility to the original creditor. It would not be a pure novation so long as the original creditor had any authority over the subject-matter, or either party had any claim on him, or responsibility to him.3 In the examples just given it will be observed that the ground of the decision was the entire extinguishment of the original debt.
§ 482. It is manifest that a strict novation but rarely takes place, although contracts in the nature of novations are
1 Wilson v. Coupland, 5 B. & Al. 228. See also Thompson v. Percival, 5 B. & Ad. 925; Evans v. Drummond, 4 Esp. 89; Reed v. White, 5 Esp. 122 In these cases the debtor was accepted by the drawee as solely responsible. See also Butterfield v. Hartshorn, 7 N. H. 345; Wharton v. Walker, 4 B. & C. 163. See post, § 573.
2 Gresham v. Morrow, 40 Ga. 487 (1869).
3 In Justinian Institutes it is said (Lib. 3, tit. 30, § 3), "Solum nova-tionem prioris obligationis fieri, quoties hoc ipsum inter contrahentes expres-sum fuerit, quod propter novationem prioris obligationis convenerunt; alioqui et manere pristinam obligationem et secundam ei accedere." of frequent occurrence in the English law. "Within this term all drafts or orders for the payment of money or transference of merchandise to extinguish a debt, may, with a little latitude, be considered to fall, as, though not answering to the exact definition, they are, in many cases, subject to the same rules as govern novations. Where an order drawn by a creditor on his debtor, in favor of a third person, to pay over any amount in his hands belonging to the debtor, is accepted by all parties, it operates, ordinarily, as a conditional extinguishment of the debt, in case the order is actually complied with.1 It may, however, be specially accepted by the third person as an absolute payment of his debt, in which case the contract is a pure novation.
§ 483. In respect to the rights and liabilities of parties where an order or draft upon a debtor is given in favor of a third person, the decisions are extremely conflicting. In a considerable number of cases it has been held, that the mere assent of the debtor on whom the order is drawn and an indorsement or transference by him on his books of the amount in favor of the third person, is sufficient to destroy the right of the original creditor to revoke the order, and to appropriate the sum to the third person.2 But this has been strenuously denied in nearly all the more modern English cases, and it has been repeatedly affirmed that the assent of all the parties is necessary to create such a privity of contract as would entitle the third person to recover, and would disable the drawer of the order from revoking it; and the ground of this rule is, that until the debtor and third person have assented to and interchanged promise and acceptance, the debtor is the mere mandatee of the drawer.3 A stricter doctrine has, however, been asserted in since doubted. But there is another objection to the present case. 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 give him that right of action there must have been an extinguishment of the intermediate debt. No such bargain was made between the parties in this case. Upon the defendant refusing to pay the plaintiff, the latter might still sue Lythgoe, and this brings the case within Cuxon v. Chad-ley." It is to be observed, however, that the ground upon which the judgment of the court in Wilson v. Coupland was founded, was not that the original debt was extinguished, but only that there was an "absolute promise " between the plaintiff and defendant, and it is nowhere admitted in the case that the original parties were unconditionally released. Mr. Justice Best says: "A chose in action is not assignable without the consent of all parties. But here all parties have assented, and from the moment of the assent of the defendants, it seems to me that the balance of £768 became money had and received to the plaintiff's use. It is said that the promise was conditional. That may, perhaps, be doubtful, but supposing it to be conditional, the event has happened upon which it became absolute." The case really decides nothing more than that where the drawee makes an absolute promise to pay, he renders himself liable to the holder of the order. See also Ford v. Adams, 2 Barb. 849, 350. In this case the declaration averred that J. S., being indebted to the plaintiff, made an order to the defendant to deliver the plaintiff a certain quantity of wood, and that the defendant accepted the order and promised J. S. to deliver the wood. But it was held on demurrer that the action was not maintainable, and the court said:" The defendant's acceptance of the order, and his promise as stated in the declaration, were without any consideration, and therefore void. This case cannot be likened to one where a debt due upon a bond, or any other contract not negotiable, has been assigned, and the debtor makes an express promise to pay. In such a case the assignee can, in his own name, in a court of equity, compel the payment of the debt. The debtor, in such a case, is under a moral and equitable obligation to pay the debt to the assignee; and that obligation is a sufficient consideration for his promise to pay the debt. Compton v. James, 4 Cow. 13. But in this case the plaintiff is not the assignee of the debt due from the defendant to Jacob Schyer. The order which he held gave him no equitable right to compel the defendant to deliver to him any wood, nor was the defendant by reason of the order under any moral or equitable obligation to deliver any wood to Jacob Schyer or to the plaintiff. He received nothing for his acceptance of the order and his promise to deliver the sixty cords of wood. The debt due from him to Jacob Schyer was not thereby satisfied in whole or in part; and