What is the difference between an 'assignment' and a 'novation' of a contract?
Why Novation substitutes a new party and releases the original obligor; assignment transfers rights but keeps the original party liable Is Correct
Answer B: Novation substitutes a new party and releases the original obligor; assignment transfers rights but keeps the original party liable
Exam Tip: Contracts
Contract questions frequently test the essential elements required for a valid contract. Remember: competent parties, mutual consent, lawful object, and sufficient consideration. Watch for void vs. voidable distinctions.
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Key Terms to Know
A contractual right giving a party the opportunity to match any offer received before the owner can accept it from a third party.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA 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.
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