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Borrowed from Latin novatio, novationis (a renewing, rennovation), from novo, from novus (new). Compare novel, novelty.


novation (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.
    • Netting by novation will occur immediately upon registration of the transaction in the SCM's name. — London Clearing House submission to the CFTC [1]
  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.

Related terms[edit]


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