Proving a Novation
“A novation is an agreement between the parties concerned for the discharge of a valid existing obligation by the substitution of a new valid obligation.” Schroer v. Cumdale Partners, LLC, 2024 WL 3882430 (Fla. 4th DCA 2024) (internal citation omitted). “Four elements form a novation: (1) the existence of a previously valid contract; (2) the agreement of the parties to cancel and extinguish the first contract; (3) the agreement of the parties that the second contract takes the place of the first; and (4) the validity of the new contract.” Id. (internal citation omitted). When arguing novation, remember these four elements that you will need to prove to substantiate that a novation occurred.
Schroer dealt with the issue of whether a novation occurred relative to the employment agreement between the parties. In the first agreement, the person was an independent contractor entitled to commissions. In a later first employment agreement, the person was an at-will employee. A second employee agreement was entered, similar to the first, but changed the salary. The person/employee was terminated for cause under the second employment agreement. The terminated person invoked the first agreement arguing commissions still needed to be paid pursuant to that agreement. The issue was whether a novation occurred – was the independent contractor agreement extinguished by the employment agreements. The appellate court, affirming the trial court, found that a novation had occurred and the employment agreements extinguished the independent contractor agreement bolstered by the merger clause in the employment agreement that maintains that it supersedes prior agreements. So, if you ever questioned the validity of the merger clause, here it is!
Please contact David Adelstein at [email protected] or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.
