California Real Estate Practice Exam

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What is the substitute contract called when a new buyer shares the purchase price with the original buyer?

A modification
An amendment
A novation
An assignment

The correct answer is: A novation

A novation is the correct answer because it is a specific type of substitute contract where a new party steps in to replace one of the original parties in the existing contract. This is different from a modification or an amendment, which typically refer to changes made to the existing contract by both parties. An assignment, on the other hand, is when one party transfers their rights and obligations to another party, but the original party remains involved in the contract. In the scenario described in the question, a novation would be the most accurate term to describe the new buyer sharing the purchase price with the original buyer.