What is the test for novation in a contract?
Alberta, Canada
The following excerpt is from Alberta Mortgage & Housing Corp. v. Strathmore Investments Ltd., 1992 CanLII 6207 (AB QB):
A three-part test for determining if novation has occurred is set out in Poison v. Wulffsohn (1890), 2 B.C.R. 39 (S.C.): 1. "the new debtor must assume the complete liability"; 2. "the creditor must accept the new debtor as … principal debtor" and not merely as an agent or guarantor; and 3. "the creditor must accept the new contract in full satisfaction of and substitution for the old contract …"
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