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    Subrogation & novation

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    Subrogation & Novation

    Uploaded by

    J.D Worldclass

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 3

    S Sold to Louis Prentzas using Selz (#R0MTF0HT)

    Novation
    The substitution of a new contract for an old one. The new agreement extinguishes the rights and
    obligations that were in effect under the old agreement.

    A novation ordinarily arises when a new individual assumes an obligation to pay that was incurred by
    the original party to the contract. It is distinguishablefrom the situation that occurs when another
    individual makes a guarantee that a debtor will pay what he or she owes to a creditor. In the case of
    anovation, the original debtor is totally released from the obligation, which is transferred to someone
    else. The nature of the transaction is dependent uponthe agreement between the parties.

    A novation also takes place when the original parties continue their obligation to one another, but a new
    agreement is substituted for the old one.

    novation

    n. agreement of parties to a contract to substitute a new contract for the old one. It extinguishes
    (cancels) the old agreement. A novation is often usedwhen the parties find that payments or
    performance cannot be made under the terms of the original agreement, or the debtor will be forced to
    default or gointo bankruptcy unless the debt is restructured. While voluntary, a novation is often the
    only way any funds can be paid. (See: accord and satisfaction)

    novation
    noun complete substitution, exchange, substitution
    Associated concepts: novation of a contract

    NOVATION, civil law.

    1. Novation is a substitution of a new for an old debt. The old debt is extinguished by the new one
    contracted in its stead; anovation may be made in three different ways, which form three distinct kinds
    of novations.
    2. The first takes place, without the intervention of any new person, where a debtor contracts a new
    engagement with his creditor, in consideration of being liberated from the former. This kind has no
    appropriate name, and is called a novation generally.

    3. The second is that which takes place by the intervention of a new debtor, where another person
    becomes a debtor instead of a former debtor, and is accepted by the creditor, who thereupon discharges
    the first debtor. The person thus rendering himself debtor for another, who is in consequenced is
    charged, is called expromissor; and this kind of novation is called expromissio.

    4. The third kind of novation takes place by the intervention of a new creditor where a debtor, for the
    purpose of being discharged from his original creditor, by order of that creditor, contracts some
    obligation in favor of a new creditor. There is also a particular kind of novation called a delegation.
    Poth.Obl. pt. 3, c. 2, art. 1. See Delegation.

    5.-2. It is a settled principle of the common law, that a mere agreement to substitute any other thing in
    lieu of the original obligation is void, unlessactually carried into execution and accepted as satisfaction.
    No action can be maintained upon the new agreement, nor can the agreement be pleaded as a bar to the
    original demand. See Accord. But where an agreement is entered into by deed, that deed gives, in itself,
    a substantive cause of action, and the giving such deed may be sufficient accord and satisfaction for a
    simple contract debt. 1 Burr. 9; Co. Litt. 212, b.

    6. The general rule seems to be that if one indebted to another by simple contract, give his creditor a
    promissory note, drawn by himself, for the samesum, without any new consideration, the new note
    shall not be deemed a satisfaction of the original debt, unless so intended and accepted by the creditor.
    What Is Subrogation?
    Subrogation is an equitable doctrine that allows a third party to be substituted for the creditor in a creditor-debtor
    situation. The party being substituted agrees to pay the original creditor for the debts, which enables the third party
    to assume the rights of the original creditor. The debtor will then be held liable to the substituted creditor, also
    called the “subrogee.”
    Subrogation can be based either on operation of law, statute, or through a written contract, which is known as a
    “subrogation agreement." Since subrogation is an equitable remedy, all of the applicable defenses and theories in
    equity apply, such as laches and unclean hands.

    What Are the Conditions for Subrogation?

    Like other doctrines of equity, subrogation will be permitted based on the circumstances and facts of each individual
    case. However, several general conditions must be met in order for a court to approve of a subrogation agreement.

    These conditions can include:

    • Payment must be rendered by the subrogee in an effort to protect or secure their own personal interests

    • The subrogee must not act by mistake or as a volunteer

    • The subrogee must not be originally primarily liable for the debt paid

    • The debt must be paid in its entirety

    • The subrogation must not cause any injustice to any of the parties

    Thus, subrogation rights will not be granted if a person has simply paid a debt that he or she is already obligated to
    pay. Also, an intermeddler, volunteer, or stranger who interjects themselves into the debt situation will not be
    granted rights under subrogation without a valid written agreement. Additionally, mistakenly making payments for
    the debtor is not grounds for subrogation.

    Do I Need to Contact a Lawyer for Subrogation issues?

    If you are attempting to pay off the debts for another person, you should contact a lawyer before doing so. This will
    help you determine whether you can assume the various rights associated with subrogation. An experienced
    attorney can help you draft a subrogation agreement that meets the various conditions imposed by equitable
    principles. It is not wise to pay off someone else’s debts without their consent, as you may not be entitled to
    reimbursements.

    - See more at: http://www.legalmatch.com/law-library/article/subrogation-conditions.html#sthash.aosWi7uz.dpuf

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