Al owes Tracy $500, due June 1. Al, Tracy, and Ted mutually agree that Ted will pay Tracy instead of paying Al the money Ted owes Al. Such an agreement is an example of:
A) an accord.
B) a novation.
C) a satisfaction.
D) a rescission.

Question

Quizplus · Accepted Answer

A novation occurs when a new contract replaces an old contract, with the consent of all parties involved. In this case, Ted's agreement to pay Tracy instead of Al, with all parties' agreement, constitutes a novation, as it replaces the original obligation between Al and Tracy with a new one involving Ted.

Al Owes Tracy $500, Due June 1