Novation is the substitution of one of the parties in a two-party agreement with the consent of all three parties concerned. To novate is to take on a new duty in place of an old one.
A supplier, for example, who wishes to relinquish a business customer may seek a new source for the customer. If all three parties agree, the contract can be ripped up and replaced with a new one that just changes in the supplier’s name. The former supplier transfers all contract rights and responsibilities to the new provider.