Contracts
What is 'novation' in the context of a Rhode Island real estate transaction?
AA new listing agreement replacing an expired one
BThe substitution of a new party or obligation for an old one, releasing the original party✓ Correct
CA court order modifying a contract
DA multiple offer situation
Explanation
Novation is the substitution of a new contract, party, or obligation for an old one, with the consent of all parties. The original party is released from the obligation.
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Key Terms to Know
Listing Agreement
A 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.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
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