Novatio
Novation
Novation is the substitution of an existing obligation by a new obligation, thereby extinguishing the former.
Novation is a legal concept under Dutch law of obligations whereby the parties agree to replace an existing obligation with a new one. As a result, the original obligation is extinguished and a new obligation arises, which may contain different terms or involve a different creditor or debtor.
In practice, novation is frequently employed in connection with refinancing, corporate acquisitions or the assignment of claims. It enables the parties to modify their contractual arrangements without the original obligations remaining in force.
“The parties agreed to novation in order to replace the old loan agreement with a new one containing adjusted interest terms.”
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