Contracts
Under Arizona law, a 'novation' in a real estate contract occurs when:
AA party adds a new addendum to an existing contract
BAn original party to the contract is replaced by a new party with the agreement of all parties, releasing the original party from further liability✓ Correct
CBoth parties agree to extend the closing date
DA court substitutes new contract terms for unconscionable original terms
Explanation
Novation replaces an original contracting party with a new party, with the consent of all parties, releasing the original party. In real estate, this might occur when a buyer wants to transfer their contract rights to another buyer—novation would release the original buyer from liability, unlike a simple assignment where the original party may remain secondarily liable.
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Key Terms to Know
Contingency
A condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Listing AgreementA contract between a property owner and a real estate broker that authorizes the broker to market and sell the property.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
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