Shannon and Rene are sisters who enter into a contract to buy an income property. The sisters get into a dispute, and Shannon wants out of the deal. However, their uncle Jerry wants to replace Shannon on the contract. Shannon agrees to the substitution so they go ahead and do it. This is an example of ________.

In this scenario, Shannon and Rene are sisters who enter into a contract to buy an income property. The sisters get into a dispute, and Shannon wants out of the deal. However, their uncle Jerry wants to replace Shannon on the contract. Shannon agrees to the substitution so they go ahead and do it. This is an example of novation.

Novation can be defined as the process or an act of legally replacing a party in a contract with another, adding an obligation to engage or replacing a contractual obligation to perform with another based on the consent of all involved parties.

chilljain33 chilljain33 · Answer 2 · 2021-12-31T06:45:13+01:00

The condition where Shannon wishes to get out of the deal and Jerry is replacing Shannon to a contract with Rene, such a contract is referred to as a contract by novation.

A novation contract is dependent on the willingness of both the parties for such replacement as a matter that only the person will replace another and the conditions of the contract do not change.

A contract by novation refers to replacement of undertaking the liabilities and benefits of an already entered contract by one or more person with respect to contract being valid.

An illegal contract created without the knowledge of such person who replaces the concerned person for the benefits and liabilities will constitute as a contract viod ab initio

The person who replaces the concerned person will have the sole responsibility of the conditions arising out of entering such contract and hence there will be a direct and unlimited liability.

Hence, the correct statement will be that Jerry will be responsible for the benefits and liabilities arising out of such contract which will be shared by Rene as it is a contract by novation.

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