Asked by Alaysia Mcnill on Jun 24, 2024
Verified
Ted Nix purchased two acres of land from Sally Pine.Nix paid 15 percent at the closing and gave his note for the balance secured by a 30-year mortgage.Five years later,Nix found it increasingly difficult to make payments on the note and finally defaulted.Pine threatened to accelerate the loan and foreclose if Nix continued in default.Pine told Nix either to get the money or obtain an acceptable third party to assume the obligation.Nix offered the land to Quick Co.for $4,000 less than the equity Nix had in the property.This was acceptable to Pine and at the closing,Quick paid the arrearage,executed a new mortgage and note,and had title transferred to its name.Pine surrendered Nix's note and mortgage to him.The transaction in question is a(n) :
A) third-party beneficiary contract.
B) novation.
C) purchase of land subject to a mortgage.
D) assignment and delegation.
Novation
The act of replacing an obligation to perform with a new obligation or replacing a party to an agreement with a new party.
Mortgage
A legal agreement by which a bank, building society, etc., lends money at interest in exchange for taking the title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.
Assignment
The transfer of rights or property from one party to another.
- Distinguish between novation and alternative contract modification methods.
Verified Answer
AM
Atlegang MogaleJun 28, 2024
Final Answer :
B
Explanation :
Novation allows the original obligor to be discharged and a new obligor to be substituted in his/her place.
Learning Objectives
- Distinguish between novation and alternative contract modification methods.