Substituted Contract Law and Legal Definition

Substituted contract is made between parties to an earlier contract. A substituted contract takes the place of an earlier contract and also discharges the earlier one. A substituted contract differs from a novation, because novation requires the substitution for the original obligor of a third person not a party to the original agreement; when the obligee accepts the third party, the agreement is immediately discharged.

A substituted contract immediately discharges the prior claim which is merged into the new agreement. As a result, in the absence of an express agreement to the contrary, the original claim can no longer be enforced. A substituted contract was created with an intent to circumvent the unsatisfactory rules that until recently governed executory accords.