Never heard of this

[Boltmaker]

Hi to all.

Hope someone can cast some knowledge on this one. My brother like me has a number of debts in dispute some with OC's others with various DCA's. Now he has come across something called NOVATION which he claims is perfectly legal. According to him if one sends a cheque say for £25 or so and a letter of NOvation to the OC or DCA with a time limit for reply of say 10days and they cash the cheque but do not reply that they do not accept the terms (ie cashing the cheque and not responding within the time frame) they have in effect accepted the terms by default and you are no longer in debt to them. Can this possibly true.

[brummie]

Re: Never heard of this

Hi

I can't comment other than i hope so!!

[Hurricane Puffrose]

Re: Never heard of this

I've googled it for you.

this is what I found.

novation n. agreement of parties to a contract to substitute a new contract for the old one. It extinguishes (cancels) the old agreement. A novation is often used when the parties find that payments or performance cannot be made under the terms of the original agreement, or the debtor will be forced to default or go into bankruptcy unless the debt is restructured. While voluntary, a novation is often the only way any funds can be paid. (See:accord and satisfaction)
Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.



Associated concepts: novation of a contract

http://legal-dictionary.thefreedictionary.com/novation

but,. please double check with others too.

[Celestine]

Re: Never heard of this

It would be lovely if it would actually stand up in court!

Sadly, I believe not and we have a lengthy debate on the matter in a thread titled 'full and final settlements'....I think!

[Hurricane Puffrose]

Re: Never heard of this

link searching now cel.

[MissFM]

Re: Never heard of this

whoops - deleted - the same as Puff's

[UnitedFront]

Re: Never heard of this

Novation cannot be done unilaterally. Novation is a process whereby one or more of the parties to a contract are "substituted" for a someone new; the process is incredibly common in the world of business.

Novation requires the actual consent of every party; silence is not consent. The cheque would be seen as payment of a contractual debt and nothing more, no matter what you put in writing.

These "techniques" have been doing the rounds for years and they never work.

[UnitedFront]

Re: Never heard of this

The following extracts are from page 939 of the fourth edition of "Commercial Law: Text Cases and Materials" by L.S. Sealy and R.J.A. Hooley, published in 2009 by Oxford University Press:

Assignment distinguished form novation, acknowledgement and power of attorney

(i) Novation
Assignment involves the transfer of existing proprietary rights without the consent of the debtor. Contractual liabilities cannot be assigned. As Lord Brown-Wilkinson emphasised in Linden Gardens Trust Ltd v Lenesta Slidge Sisposals Ltd [1994] 1 AC 85 at 103: 'the burden of a contract can never be assigned without the contract of the other party to the contract in which event such consent will give rise to a novation'.

...

Novation involves the substitution of a new contract for an existing contract, either between the same parties or between different parties. Thus, where there is to be a change of creditor, the debtor, the old creditor and the new creditor must be parties to the new contract. Unlike an assignment, which does not require the debtor's consent, a novation requires the consent of all parties (Rasbora Ltd v JCL Marine Ltd [1977] 1 Lloyd's Rep 645). The new contract must be supported by consideration moving from the new promisee (Tatlock v Harris (1789) 3 Term Reo 174 at 180).

It therefore follows that all parties need to be a party to the new contract; furthermore, the new debtor would be required to provide some form of consideration. In your scenario, you as the original debtor would have provided consideration pre-novation which would obviously not suffice.

[labman]

Re: Never heard of this

It's actually fairly simple once you understand what novation is. Sadly a contract cannot be imposed on a third party, a contract has to be properly formed, which involves in VERY crude terms Offer and Acceptance - Intent to create legal relations and Consideration

[Guest]

Re: Never heard of this

As to the courts: who knows what they would say.
However, they have written off thousands on a store card sent to a consumer without request.
Therefore, you'd be better off writing just the offer letter first, then send the cheque if they agree.
They're more likely to agree if you're going to go bankrupt.
In fact, it's a no-brainer!

"Dear so-and-so

Account number: zogzogziggazigahhhhhhhhh Balance:£3,000,000,000,000

It is a matter of regret that I am unable to pay the debt I owe to you, or I will go into default/ bankrupt/need to take the matter to court, to dispute the amount owed. However, I'd like to create a new legal relationship with you under the principle of novation. I hereby offer you a new contract to substitute for the one numbered above. This new contract will extinguish the old one, numbered above.

The full consideration for this new contract, under novation, will be £xxxx, which I will pay immediately on your acceptance of the offer.

I can hold this offer open for 2 months, at the end of which time, it will have expired and I will go into default/bankrupt/take the matter to court.

Thankyou for your time and consideration in this matter"

Actually, this is done by creditors all the time.
Thanks, Boltmaker - I might just use it.

[labman]

Re: Never heard of this

As this is common law, they could, of course, write back within a 'reasonable' period and say they are cashing the cheque on account, against the remaining outstanding debt with them. It's very similar in that respect to making a Full and Final Settlement offer.

[UnitedFront]

Re: Never heard of this

As to the courts: who knows what they would say.

Anybody who thinks about it and understands a novation would know 100% that the courts would reject outright the OP's original hypothesis.

As to your suggestion, effectively you would be trying to use a novation in place of a 'Full and Final Settlement', and I can't really see the benefit of the exercise.

Unless I'm very much mistaken, the purpose to the OP's original hypothesis would be to effectively 'sneak' a novation in through the back door. If you ask them to agree, as is needed, they are very unlikely to. If they were in the mood to agree, I can't really see how making an offer to novate is more likely to be met with acceptance than making a FFS offer. Indeed, I would think it probably less likely.

[Boltmaker]

Re: Never heard of this

Noted the comments posted. Thought it was too good to be true, allthough brother has used it on two OC's some time ago and up to date neither have been in touch with him again since cashing his cheques and replying with rejection out of the time scale he set. Or so he tells me,but claims the two OC's he did this two were more than three years ago.