Which of the following occurs when a new contract is substituted for an existing one?

When a new contract is substituted for an existing one, this process is known as novation. Novation occurs when all parties involved agree to replace an old contract with a new one, effectively extinguishing the original contract and creating a new legal relationship. This often includes transferring rights and obligations from the original party to a new party, thereby releasing the original party from liability under the old contract.

The significance of novation lies in the fact that both parties must consent to the change, which is essential in ensuring that all involved understand their rights and responsibilities in the new arrangement. Novation is commonly used in situations such as assignments of contracts, where a new party takes over the obligations, or in restructuring agreements where the terms might change considerably.

In contrast, the other options do not correctly describe the substitution of one contract for another. For example, a breach of contract refers to a failure to perform as specified in the original agreement, and assignment pertains to transferring rights under a contract without necessarily creating a new contract or extinguishing the original obligations. A switch could imply a change of terms or parties but does not have a legal definition in contract law like novation does. Thus, novation accurately captures the essence of creating a new contract in place of an old