section 6 novation

Consideration in a Contract of Novation

Same rule as other contracts—consideration can be any loss, inconvenience, or giving up of a right (e.g., discharging a debt, postponing a remedy, stopping or not filing a lawsuit).

Novation Is Never Presumed

In civil law, novation (novatio) literally means “to make new” and follows the Roman law principle novatio non praesumitur—novation is never presumed; it must clearly show the animus novandi, debitum pro debito, meaning the old obligation is extinguished and replaced by a new one.

Art. 1291. Obligations may be modified by:

1. changing their object or principle conditions

2. substituting the person of the Debtor

3. subrogating a third person in the rights of the creditor

Novation

A mode of extinguishing an obligation by replacing it with a new obligation that changes the object, the principal conditions, or the persons involved

Novation Requisites

P – Previous obligation must exist

A – Agreement of parties to a new contract

V – Validity of the new contract

E – Extinguishment of the old contract

Form Required in Novation

No specific form is needed; consent of both parties suffices. Implied novation occurs when the old and new obligations are irreconcilably incompatible.

Novation is Not Presumed

Novation is never presumed; the parties’ animus novandi must be clear—by express agreement or unmistakable acts. The old obligation must be extinguished by the new one, either expressly or impliedly. No specific form is needed for implied novation; what matters is the irreconcilable incompatibility between old and new contracts.

Kinds of Novation - As to subject

a. real or objective

b. personal or subjective

c. mixed

Kinds of Novation - As to constitution

a. express (explicit declaration)

b. implied material (incompatibility)

Kinds of Novation - As to extent or effect

a. total or extinctive

b. partial or modificatory

Kinds of Novation - As to origin

a. legal

b. conventional

Real or objective Novation

Novation it's made either by changing the object or the principal conditions

Personal or Subjective Novation

Novation by substituting the person of the debtor or subrogating a third person to the rights of the creditor

Mixed Novation

Novation that involves both a change in the object or conditions and a change in the persons of the obligation

Express (explicit declaration)

it is express when the new obligation declares in an unequivocal terms that the old obligation is extinguished

implied (material incompatibility)

it is implied when the new obligation is incompatible with the old one on every point

Test of Incompatibility

Novation exists when the old and new obligations are so incompatible that they cannot stand together

Total or extinctive Novation

Novation that completely extinguishes the old obligation and replaces it with a new one

dual function of extinctive novation

1. one to extinguish an existing obligation

2. to substitute a new one in its place

Partial or modificatory Novation

Novation that modifies only some conditions of the obligation while the rest of the obligation remains

legal novation

novation which takes place by operation of law

conventional novation

innovation which takes place by stipulation of the parties

Kinds of Personal Novation

Substitution of the debtor and subrogation of the creditor

Kinds of Substitution

Expromission and delegacion

Expromission

Substitution of the debtor initiated by a third person who assumes the obligation without the knowledge or against the will of the original debtor but with the consent of the creditor

Delegacion

Substitution of the debtor where the original debtor proposes a new debtor who assumes the obligation with the consent of the creditor

Delegado

The new debtor who assumes the obligation in delegacion

Delegante

The original debtor who proposes the substitution of the new debtor

Delegatario

The creditor who accepts the substitution of the debtor

Effect of Novation of a Principal Obligation on Accessory Obligations

Accessory obligations such as guaranty or pledge are extinguished unless the parties agree that they shall remain

Effect of Novation Where the New Obligation is Void

The novation is void and the original obligation remains in force

Effect of Novation Where the Old Obligation is Void

The novation is also void because there is no valid obligation to extinguish

Subrogation

The substitution of one person in place of the creditor so that the new creditor acquires the rights of the former creditor

Kinds of Subrogation

Conventional subrogation and legal subrogation

Conventional Subrogation

Subrogation that takes place by agreement of the parties

Conventional Subrogation and Assignment of Rights Distinguished

Conventional subrogation transfers the creditor’s rights through agreement and extinguishes the old obligation while assignment of rights only transfers the credit without extinguishing the obligation

Legal Subrogation

Subrogation that takes place by operation of law in the cases provided by the Civil Code