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Question:

When an existing contract is replaced by an entirely new contract, it is an example of ____

A novation.
Explaination

This question illustrates the need to be familiar with real estate terminology. Under a novation, there is a substitution or exchange of a new obligation or contract for an old one by the mutual agreement of the parties. Refer to the Real estate glossary at the back of this book for definitions to critical real estate terms you are likely to encounter on the state exam.