What is the term used when a new party is formed in a contract, replacing the original parties?

The term used when a new party is formed in a contract, replacing the original parties, is called novation. Novation occurs when all parties involved agree to the substitution of one party in the place of another, effectively voiding the original contract and creating a new one with the new party. This process ensures that the rights and obligations under the contract are transferred to the new entity, providing legal recognition of the change in parties.

In context, an assignment refers to the transfer of rights or benefits from one party to another while keeping the original parties intact, which does not involve the creation of a new party. Modification refers to changes made to the terms of an existing contract but does not entail replacing any of the parties. Delegation involves a party transferring their duties to another party but does not dissolve the original contractual obligation, meaning the original party remains responsible for its performance. Therefore, novation is the correct term that embodies the complete substitution of parties in a contract.