In what scenario is novation required?

Novation is a legal concept where an existing contract is voided and replaced with a new contract that involves a new party, while the original parties are released from their obligations. The correct scenario where novation is required occurs when there is a change in the contractor. In this situation, the original contractor is completely replaced by a new contractor, necessitating a new contract. This process ensures that the obligations and rights under the original agreement are transferred to the new party, which protects the interests of all parties involved.

In contrast, a simple name change does not require novation because the same legal entity remains responsible for the contract, just under a different name. Subcontractor changes might not necessitate novation if the primary contractor remains the same and simply changes their subcontractor without altering the contractual obligations. Similarly, changes to payment terms can often be accommodated through an amendment to the original contract rather than requiring a new contract altogether. These scenarios don't fulfill the criteria for novation, which is specifically designed for the transfer of obligations and rights when parties in a contract change.