That is why John decides to settle his debt obligation with a new one by proposing to Peter and Mary a novation agreement. The parties agreed to conclude the contract by signing the Novation Agreement, in which Mary assumes John`s obligations to Peter, and she will now be obliged to fulfill all the obligations that Jean-Pierre owed. The innovation agreement can be used to renegotiate the repayment plan, provided the parties agree on the new terms. To continue with our example, instead of the money you owe, Monica may agree to accept a coin from Sally`s original work that is worth approximately $200. The transfer of ownership constitutes a renewal and effectively exceeds the original cash commitment. An innovation is akin to a sale which is the action of a party that transfers a stake in a property or business to a third party, unlike the sale of the entire business. However, while innovations pass on both the potential benefits and liabilities to the new party, the endowments only follow on the benefits, so that all future obligations remain within the purview of the original real estate owner. The protocol, which will come into force on 24 October 2005, contains a series of clear best practices that the three parties must follow in order to achieve a legal reorganization of a credit derivative or interest rate transaction. Instead of amending the agreement, as stipulated in the ISDA protocol, the protocol improves the agreement by defining the steps to be taken to obtain the prior written approval of the remaining party. The remaining portion will continue to send a confirmation of the innovation that must be signed by the three parties, which proves the emergence of innovation, but the non-execution of this document has no impact on the validity of the innovation itself. Scottish legislation appears to be stricter than English legislation on the application of the doctrine of innovation and needs stronger evidence of the creditor`s agreement on transfer of responsibility.

[3] Novation may also occur in the real estate sector, where a tenant hands over the rental period of a property to a third party. The tenant enters into the leaseLeaseA-leasing is a tacit or written agreement that defines the conditions under which a landlord agrees to rent a property that must be used by a tenant. The other party, which ultimately transfers responsibility for the payment of the lease, repairs of property damage and other obligations stipulated in the original lease. The parties can maintain the original lease or negotiate the terms of the contract until a consensus is reached. In addition, novation is a consensual transfer of rights and obligations that requires all contracting parties to agree and sign the agreement.