novation means replacement of a contract with one or more new contracts, in particular in financial markets the replacement of a contract between a particular buyer and seller with contracts between the clearing house and each party. Lexicurio rates it Sui generis — a strength score of 86 out of 100.
novation is pronounced /noʊˈveɪʃən/.
Etymology
Borrowed from Latin novātiō (“a renewing, rennovation”), from novō, from novus (“new”). Compare novel, novelty.
noun
- Replacement of a contract with one or more new contracts, in particular in financial markets the replacement of a contract between a particular buyer and seller with contracts between the clearing house and each party.“1998, London Clearing House, submission to the U.S. Commodity Futures Trading Commission http://www.cftc.gov/opa/press98/opa4163-98-att.htm
Netting by novation will occur immediately upon registration of the transaction in the SCM's name.”
- A new contract between the original contracting parties whereby the first obligation is extinguished and a new obligation is substituted.“An example of a novation is where an original debt which was payable in two instalments is novated to become payable in five installments.”