Legal Definitions - substitute obligation

Definition: A substitute obligation is a legal duty that replaces an extinguished obligation through novation. Novation is a process where a new obligation replaces an old one, and the parties involved agree to the change.

Example: A borrower owes a lender $10,000. The borrower and lender agree to replace the old obligation with a new one, where the borrower owes $8,000 instead. The new obligation is a substitute obligation that replaces the old one.

This example illustrates how a substitute obligation can replace an old obligation through novation. The borrower and lender agreed to the change, and the new obligation takes the place of the old one.