What is known as the substitution of a new party for the original party in a contract?

The correct answer is novation, which refers to the process of replacing one of the original parties in a contract with a new party, effectively creating a new contract while discharging the original party from any obligations. This legal mechanism ensures that all parties involved agree to the change, and the new party takes on the rights and responsibilities outlined in the original agreement.

Novation is fundamentally different from other terms related to contracts: for instance, assignment involves transferring rights or benefits from one party to another without necessarily relieving the original party from their obligations. Ratification pertains to confirming or validating a previously invalid contract or act, and attornment generally refers to a tenant recognizing a new landlord after a transfer of property ownership. Thus, novation is the most precise term when describing the substitution of one party for another in a contractual context.