1.NounReplacement of a contract with one or more new contracts, in particular in financial markets the replacement of a contract between a particular buyer and seller with contracts between the clearing house and each party.
2.NounA new contract between the original contracting parties whereby the first obligation is extinguished and a new obligation is substituted.
"An example of a novation is where an original debt which was payable in two instalments is novated to become payable in five installments."