Novation substitutes a new contract, extinguishing the prior obligation where parties agree and replacing debtor or creditor by mutual consent. Novation is the substitution of a new contract for an existing one so that the original obligation is extinguished and need not be performed when all parties agree. Essential requisites are a previous valid obligation, agreement of all parties to the new contract, extinguishment of the old obligation, and validity of the new one. Novation requires both discharge of the prior debt or debtor and substitution by a new debt or debtor; mere variation of terms is insufficient.