Which of the following best defines novation?

Novation is best defined as creating a new agreement that replaces an old one. This process involves three parties where one party's rights and obligations under a contract are replaced with those of a new party. The original contract is effectively terminated, and the new contract takes its place, often with different terms or parties involved.

This concept is significant in real estate transactions as it can facilitate the exchange of obligations without disrupting the continuity of an agreement, ensuring all parties clearly understand their roles and responsibilities under the new terms. In the context of real estate, this could occur when a buyer wishes to transfer their purchase agreement to another buyer, requiring the consent of the seller.

Changing the terms of an existing contract refers to a modification rather than a novation, as it does not involve creating a new contract. Transferring rights without altering the agreement pertains to assignment, where the original contract remains in effect but the rights to that contract are passed on. Ending a contract prematurely refers to termination rather than novation, which involves the replacement of an agreement. Thus, the definition of novation specifically involves the establishment of a new contract that supersedes the previous one.