law-novation in contract law |
NOVATION AS A LEGAL CONCEPT
The party urging novation as a defense bears the burden of proof. Honeycutt v. Billingsley, 992
S.W.2d 570, 577 (Tex.App.-Houston [1st Dist.] 1999, pet. denied). Novation occurs if a contract
evidences an intention to relinquish and extinguish pre-existing claims and rights of action; in lieu
of the old obligation, a party accepts the promise of performance of the new obligation instead of
the performance itself. Priem v. Shires, 697 S.W.2d 860, 863-64 & n. 3 (Tex.App.-Austin 1985,
no writ). The new contract discharges the original obligation and only the new obligations may be
enforced. Id. Therefore, to prove novation, [party asserting it] must prove (1) the validity of a
previous obligation, (2) an agreement among all parties to accept a new contract, (3) the
extinguishment of the previous obligation, and (4) the validity of the new agreement. Fulcrum
Cent. v. AutoTester, Inc., 102 S.W.3d 274, 277 (Tex. App.-Dallas 2003, no pet.) (citing Vickery v.
Vickery, 999 S.W.2d 342, 356 (Tex. 1999)). A court may infer that a new agreement is a novation
of an earlier agreement when the new agreement is so inconsistent with the earlier agreement
that the two agreements cannot subsist together. CTTI Priesmeyer, Inc. v. K & O Ltd. P'ship, 164
S.W.3d 675, 681 (Tex. App.-Austin 2005, no pet.) (citing Fulcrum, 102 S.W.3d at 277).
In the absence of provisions so inconsistent that both contracts cannot 365 stand, "a second
contract will operate as a novation of a first contract only when the parties to both contracts intend
and agree that the obligations of the second shall be substituted for and operate as a discharge
of the obligations of the first." Chastain v. Cooper & Reed, 152 Tex. 322, 257 S.W.2d 422, 424
(1953). A new agreement can establish novation as a matter of law when the state of the
evidence is such that reasonable minds cannot differ as to its effect. Id. Whether a subsequent
agreement operates as a novation of the first is a question of intent. Allstate Ins. Co. v. Clarke,
471 S.W.2d 901, 907 (Tex. Civ. App.-Houston [1st Dist] 1971, writ ref'd n.r.e.). It must clearly
appear that the parties intended a novation; novation is never presumed. Id.
Pac. Employers Ins. Co. v. Brannon, 150 Tex. 441, 448, 242 S.W.2d 185, 189 (1951) (distinguishing the
law of accord from that of novation, and stating that "a mere accord does not necessarily supersede the
original claim. . . . ").
HOUSTON CASE LAW ON NOVATION
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