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Definition of 'Novation'

Novation is the legal term for the substitution of a new contract for an old one. It can be used in a variety of business contexts, but it is most commonly used in the context of loan agreements. In a loan agreement, novation typically occurs when a new lender agrees to take over the loan from the original lender. The original lender is then released from all liability under the loan agreement, and the new lender becomes the sole party responsible for repayment of the loan.

Novation can also be used in other business contexts, such as when a new tenant takes over a lease from an existing tenant. In this case, the original tenant is released from all liability under the lease agreement, and the new tenant becomes the sole party responsible for fulfilling the terms of the lease.

Novation is a complex legal concept, and it is important to consult with an attorney before entering into any novation agreement.

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