29. The term Novation, in Roman Law was applied to substituting a new Obligation for the former one. But this took place in two ways -

1. When the Debtor himself gave a new Obligation, which the Creditor accepted in lieu of the former one, which was thereby cancelled. This is called by us Renewal,

2. When the Debtor transferred to the Creditor an Obligation, or Debt, or Credit, which was due to him from some one else: if the Creditor agreed to receive this, he thereby discharged his own Debtor, and agreed to take the Debtor's Debtor as his Debtor: and then his Debtor was discharged - unless he retained his Right against him as a surety.

A familiar instance of this is where a person pays his Creditor by giving him a banker's Notes. If the Creditor consents to receive them, his Debtor is discharged, and the banker is now the Debtor to the new Creditor.

Or suppose that a Debtor and his Creditor are both customers of the same bank. The Debtor gives his Creditor a Cheque on his account. The banker transfers the Credit from one account to another. That is a Novatio. The banker is freed from his Debt to the Transferor, and becomes Debtor to the Transferee, and the Transferor is freed from his Debt to the Transferee.

When the Debtor expressly consented to the transfer of the Debt, it was called a Delegatio, and the Debtor was said to be Delegatus.

The Novatio was also called Transfusio.

The Novatio was the same thing as a Payment in Money.

As is said in the Digest - "The term Payment includes not only Payment in Money, but also the Transfer of a Credit."

This kind of Novatio is also termed an "Exchange" in commerce, when effected by persons living in different places. A person living in one place may be Debtor to one person living in another place and Creditor to another person living in the same place. If these Debts were to be settled by Payments in Money, it is evident that it would require two transmissions at considerable expense. The matter may evidently be settled by the Creditor living in the first place giving his Creditor living in the other place an order upon his Debtor living in the same place. It is exactly the same thing in principle as a person paying a Debt by giving his Creditor a Cheque on his banker. The mass of reciprocal transactions of this nature which takes place between different countries is called the Foreign Exchanges, a subject we shall have to investigate fully in a future chapter.