Contracts
Which of the following best describes 'novation' in the context of an Oregon real estate contract?
AAdding an addendum to an existing contract
BThe substitution of a new contract or party in place of an old one, releasing the original party from liability✓ Correct
CThe cancellation of a contract by mutual agreement
DTransferring a lease from one tenant to another
Explanation
Novation occurs when a new contract or a new party is substituted for an existing one, and the original party is released from all obligations. For example, when a new buyer is substituted in a purchase contract and the original buyer is released, novation has occurred.
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