Novation vs. Alteration — What's the Difference?
Edited by Tayyaba Rehman — By Fiza Rafique — Updated on September 25, 2023
Novation is the replacement of an obligation with another or a party in a contract with a new one. Alteration means a change or modification. While novation introduces new elements, alteration adjusts existing ones.
Difference Between Novation and Alteration
Table of Contents
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Key Differences
Novation primarily finds its relevance in the realm of contracts and legal agreements. In its essence, novation involves replacing a prior obligation with a new one or substituting one of the original parties to a contract with a new party. This ensures the original obligation is extinguished and a fresh one takes its place. On the contrary, alteration speaks to the broader act of making changes or modifications to something that already exists, without necessarily replacing it entirely.
To illustrate, consider a scenario involving a loan agreement. If a borrower and a lender agree that a third party will assume the loan and its obligations, replacing the original borrower, this is an instance of novation. The original borrower's obligation ends and the third party's begins. In contrast, if they merely changed the terms of the loan, such as the interest rate or the repayment schedule, without replacing the parties involved, it would be considered an alteration.
Alteration can be applied to a wide variety of contexts beyond just contracts. From clothing to architectural structures, alteration implies making changes or adjustments. Novation, being more specialized, is predominantly limited to contracts and financial instruments. One can alter a dress, a document, or a plan. However, one would novate a lease or an obligation.
In summary, while both novation and alteration revolve around change, their nature and scope are distinct. Novation typically brings in a new contractual party or obligation, completely replacing the old. Alteration, meanwhile, modifies existing elements without complete replacement.
Comparison Chart
Basic Definition
Replacement of obligation or party in a contract.
A change or modification.
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Context of Use
Primarily in contracts.
Broadly applicable to various contexts.
Effect
Extinguishes old obligation or party.
Modifies without replacing.
Nature
Comprehensive change.
Adjustments to existing elements.
Scope
More specific and narrow.
General and wide-ranging.
Compare with Definitions
Novation
Substitution of a new party for one of the original contract parties.
After the merger, a novation allowed the new company to step into the original contract.
Alteration
A transformation or conversion of state or condition.
The alteration from liquid to gas is called vaporization.
Novation
A fresh start in contractual relationships.
Through novation, the previous tenant's lease was transferred to me.
Alteration
A revision to a previous version or plan.
The script had multiple alterations before the final draft.
Novation
The act of replacing an obligation in a contract with a new one.
The bank agreed to the novation of the loan terms.
Alteration
A change or modification made to something.
She made an alteration to the design.
Novation
Extinguishing an old promise to introduce a new one.
The novation process ensured his old debts were cleared.
Alteration
The process of adjusting or adapting something.
The building underwent significant alteration.
Novation
Novation, in contract law and business law, is the act of – replacing an obligation to perform with another obligation; or adding an obligation to perform; or replacing a party to an agreement with a new party.In international law, novation is the acquisition of territory by a sovereign state through "the gradual transformation of a right in territorio alieno [in foreign territory] into full sovereignty without any formal and unequivocal instrument to that effect intervening".
Alteration
A variation introduced to an original form.
His suit needed a minor alteration to fit perfectly.
Novation
The substitution of a new contract for a previous contract, or the substitution of a new party for a previous party in a contract, so that the previous obligation is considered discharged or the previous obligor released.
Alteration
The act or procedure of altering.
Novation
(legal) 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.
Alteration
The condition resulting from altering; modification.
Novation
(legal) 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.
Alteration
The act of altering or making different.
Novation
Innovation.
I shall easily grant that novations in religion are a main cause of distempers in commonwealths.
Alteration
The state of being altered; a change made in the form or nature of a thing; a changed condition.
Novation
A substitution of a new debt for an old one; also, the remodeling of an old obligation; debt restructuring.
Alteration
The act of altering or making different.
Alteration, though it be from worse to better, hath in it incoveniences.
Novation
(law) the replacement of one obligation by another by mutual agreement of both parties; usually the replacement of one of the original parties to a contract with the consent of the remaining party
Alteration
The state of being altered; a change made in the form or nature of a thing; changed condition.
Ere long might perceiveStrange alteration in me.
Appius Claudius admitted to the senate the sons of those who had been slaves; by which, and succeeding alterations, that council degenerated into a most corrupt.
Novation
The consensual replacement of a contract with a new one.
Both parties agreed to a novation of their initial agreement.
Alteration
An event that occurs when something passes from one state or phase to another;
The change was intended to increase sales
This storm is certainly a change for the worse
The neighborhood had undergone few modifications since his last visit years ago
Alteration
The act of making something different (as e.g. the size of a garment)
Alteration
The act of revising or altering (involving reconsideration and modification);
It would require a drastic revision of his opinion
Common Curiosities
Can a building undergo novation?
Not typically. Buildings can undergo alteration (changes), but novation is about obligations or contractual parties.
Does an alteration always require consent?
Depending on the context, some alterations might require consent, especially if they impact others.
Can alteration refer to a change in behavior?
Yes, it can refer to any change or modification, including behavior.
Can alteration be minor or insignificant?
Yes, alterations can range from minor tweaks to major changes.
Why would someone opt for novation instead of creating a new contract?
Novation allows parties to maintain some terms of an existing contract while changing others or changing parties.
Can the alteration of a document invalidate it?
Potentially, if the alteration isn't agreed upon or breaches its terms.
Do novation and alteration mean the same thing?
No, novation replaces a contract or obligation, while alteration modifies something existing.
Can alteration completely change the nature of something?
While alteration can make significant changes, it doesn't replace the original entity.
Is novation limited only to contracts?
Primarily, but it can be used in other contexts involving obligations.
Can you give an example of alteration in daily life?
Adjusting the hem of a dress or changing a recipe.
What's the result of a successful novation?
The original obligation or party is replaced entirely.
In what scenario would novation be essential?
When selling a business, novation can transfer existing contracts to the new owner.
Is novation common in financial markets?
Yes, especially in derivative markets where obligations are often novated.
Can alteration apply to intangible concepts?
Yes, concepts like plans, ideas, or strategies can undergo alteration.
If I take over someone's car lease, is that novation?
If the original leaseholder is entirely replaced by you with the agreement of all parties, it's novation.
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Written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
Edited by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
