Contracts
In Tennessee, a 'novation' in a real estate contract occurs when:
AThe parties agree to add a new term to the existing contract
BA new party is substituted for an original party, releasing the original party from liability✓ Correct
CThe contract is amended in writing
DThe closing date is extended
Explanation
Novation substitutes a new party for an original contracting party with the consent of all parties, releasing the original party from further obligation. This is commonly used in lease assignments.
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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.
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.
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.
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