novation

Borrowed from Latin novātiō (“a renewing, rennovation”), from novō, from novus (“new”). Compare novel, novelty.

• IPA^(key): /noʊˈveɪʃən/

• Audio (US):

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novation (countable and uncountable, plural novations)

1. (law) 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 [1]

     Netting by novation will occur immediately upon registration of the transaction in the SCM's name.

   • 2024 September 18, 'Industry Insider', “GBR starts to take form”, in RAIL, number 1018, page 84:

     A similar novation of infrastructure ownership was seen as a logical development for the operation of Merseyrail services. But this has remained with Network Rail, […] .

2. (law) 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.

• novate
• novatio