Which term describes a new contract that substitutes an original contract?

The term that describes a new contract substituting for an original contract is known as novation. In a novation, the original contract is extinguished, and a new contract is created, which replaces the old one. This process involves three parties: the original parties to the contract and a new party who will take on the obligations and rights of the contract. Novation requires the consent of all parties involved, and it results in a fresh contract that reflects the new terms and conditions agreed upon.

This differs from assignment, where the original party transfers their rights and obligations to a third party, but does not release them from liability under the original contract. Breach refers to a violation of the contract terms, while rescission is the cancellation of a contract, returning all parties to their pre-contract status, which is not the same as creating a new contract to replace the original one. Understanding novation reinforces the concept of contracts in real estate and the legal implications surrounding the transfer and substitution of contractual obligations.