- Official section
- National V.A and V.C: Contract Law and Purchase Agreements
- Broker weight
- Part of 19% of the national portion
- Expected scored items
- The current PSI broker outline assigns about 19 of 100 scored national items to Contracts
Contracts exam concept
Assignment vs. novation in real estate
Follow the liability. An assignment moves a right or contract interest to an assignee, but it does not automatically erase the assignor's unfinished obligations. A novation goes further: all required parties agree to a valid substitute and extinguish the old obligation. If the original party is expressly released, think novation. If a right simply changes hands, think assignment.
Last updated: August 1, 2026
What is the difference at a glance?
Short answer: Assignment transfers a contractual right or interest from assignor to assignee, who generally stands in the assignor's shoes and receives no better right than the assignor owned. Duties are delegated rather than assigned, and an assumption can make the assignee responsible for performance. The assignor is not automatically released. Novation requires a previous valid obligation, agreement of all parties to a valid new contract, and extinguishment of the old contract. Its defining result is substitution plus release.
This guide teaches the broker-exam distinction, not transaction-specific legal advice. Assignment clauses vary, and some restrict assignment, require consent, or distinguish an assignment of rights from a delegation of duties. Personal-service obligations and transfers that materially alter the other party's expected performance can raise separate limits. Current Illinois law also includes licensed-activity rules for a pattern of dealing in assignable real estate contracts. Sources were reviewed through August 1, 2026.
What changes from one term to the next?
- Terms
- Assignment vs. novation
- Difference
- Assignment transfers a right or interest. Novation substitutes a new contract or party and extinguishes the old obligation.
- Question cue
- Transfer versus substitution plus release.
- Terms
- Assignment vs. delegation
- Difference
- Rights are assigned. Duties are delegated to another performer.
- Question cue
- Benefit versus burden.
- Terms
- Delegation vs. novation
- Difference
- Delegation ordinarily leaves the delegator liable. Novation discharges the replaced party by agreement.
- Question cue
- Helper added versus old obligor released.
- Terms
- Assignee vs. delegate
- Difference
- An assignee receives a right. A delegate undertakes performance of a duty; the same person can be both.
- Question cue
- Receives benefit versus performs obligation.
- Terms
- Assumption vs. release
- Difference
- Assumption creates a promise by the new party to perform. Release discharges the old party.
- Question cue
- New liability does not automatically erase old liability.
- Terms
- Notice vs. consent
- Difference
- Notice tells the obligor an assignment occurred. Consent is agreement to it when the contract or law requires approval.
- Question cue
- Information versus authorization.
- Terms
- Assignment vs. amendment
- Difference
- Assignment changes who holds a contractual right. Amendment changes a contract term by agreement.
- Question cue
- Transfer interest versus revise term.
- Terms
- Assignment vs. deed
- Difference
- Assignment transfers a contract interest before or apart from conveyance. A deed transfers an interest in real property when properly delivered and accepted.
- Question cue
- Contract right versus title instrument.
- Terms
- Assignor vs. assignee
- Difference
- The assignor transfers the right. The assignee receives it and generally stands in the assignor's shoes.
- Question cue
- Gives versus gets.
- Terms
- Consent clause vs. no-assignment clause
- Difference
- A consent clause conditions transfer on approval. A no-assignment clause may prohibit a transfer or specify a remedy, depending on its wording and governing law.
- Question cue
- Read the exact restriction before choosing an effect.
How does the distinction change the answer?
Buyer assigns an executory purchase contract
Scenario: A purchase contract permits assignment. Before closing, Buyer A signs a written assignment transferring the right to purchase to Buyer B. The seller receives notice, but no document releases Buyer A from the payment duty.
- An identifiable contract right moved from Buyer A to Buyer B.
- Buyer B is the assignee and generally receives Buyer A's contract position.
- No release or extinguishment of Buyer A's obligation is shown.
Answer: This is an assignment, not a proven novation.
Seller approves a substitute buyer and release
Scenario: Buyer A, Buyer B, and the seller sign a new agreement. It names Buyer B as the purchaser, states that Buyer A has no further liability, extinguishes the original buyer obligation, and is otherwise valid.
- A valid original obligation existed.
- All affected parties agreed to the substitute contract.
- The writing expressly extinguishes Buyer A's old obligation.
Answer: The transaction is a novation.
Tenant delegates maintenance work
Scenario: A tenant hires a contractor to perform maintenance the lease requires the tenant to complete. The landlord never agrees to release the tenant.
- The contractor performs the tenant's duty rather than receiving the tenant's lease rights.
- This is a delegation of performance.
- The tenant remains responsible to the landlord if the work is not performed as required.
Answer: Delegation occurred, but no novation released the tenant.
Assignee assumes without seller release
Scenario: Buyer A assigns a permitted contract to Buyer B. Buyer B signs an assumption promising to pay and close. The seller acknowledges notice but does not agree to discharge Buyer A.
- Buyer B has accepted performance duties in addition to receiving rights.
- Assumption can make Buyer B responsible under the new promise.
- The seller did not agree to extinguish Buyer A's original obligation.
Answer: There is assignment and assumption, but not necessarily novation.
Contract requires prior written consent
Scenario: A buyer signs an assignment even though the purchase contract says no assignment is allowed without the seller's prior written consent. The seller has not consented.
- The general possibility of assignment does not erase the negotiated restriction.
- The required written consent is missing.
- The precise contract language and governing law control the consequence.
Answer: Do not treat the attempted transfer as an unrestricted valid assignment against the seller.
Wholesaler repeatedly markets assignable contracts
Scenario: An unlicensed person repeatedly enters and markets assignable real estate purchase contracts for profit on two occasions within 12 months and assumes that calling each deal an assignment avoids licensing law.
- Assignment is a contract mechanism, not a licensing exemption.
- The current Illinois license definition addresses a pattern of dealing in assignable purchase contracts or options.
- The activity and any applicable exemption must be evaluated under the License Act.
Answer: The assignment label does not by itself remove Illinois licensing requirements.
The R-E-L-E-A-S-E transfer test
- Right or duty: identify whether the fact pattern transfers a benefit, delegates performance, or does both.
- Existing contract: confirm the original obligation, parties, conditions, and current contract status.
- Limits: read consent, no-assignment, personal-service, material-burden, writing, and licensing rules.
- Execution: locate the assignment, assumption, signatures, authority, notice, and effective date.
- Agreement of all parties: require it when the proposed answer is novation rather than ordinary assignment.
- Substitution and extinguishment: choose novation only if the valid new arrangement releases the replaced obligation.
- Concept
- Assignment
- What changes
- Holder of a right
- Original party released?
- Not by assignment alone
- Exam phrase
- Stands in the assignor's shoes
- Concept
- Delegation
- What changes
- Person performing a duty
- Original party released?
- Normally no
- Exam phrase
- Delegator remains liable
- Concept
- Assumption
- What changes
- New party promises to perform
- Original party released?
- Not by assumption alone
- Exam phrase
- Assignee accepts duties
- Concept
- Novation
- What changes
- Party or obligation is substituted
- Original party released?
- Yes, replaced obligation extinguished
- Exam phrase
- All parties agree to release
Where do similar terms create traps?
- Trap
- Assuming assignment releases the assignor
- Correction
- Look for an obligee-approved release or novation. Transfer alone does not erase unfinished duties.
- Trap
- Calling duties assigned
- Correction
- Use delegation for duties and assignment for rights.
- Trap
- Calling every assumption a novation
- Correction
- Assumption adds the new party's promise; novation also extinguishes the old obligation by mutual agreement.
- Trap
- Ignoring the original contract
- Correction
- Check consent, no-assignment, notice, default, and remedy clauses before classifying the transfer.
- Trap
- Giving the assignee better rights
- Correction
- The assignee generally stands in the assignor's shoes and takes no greater interest than the assignor had.
- Trap
- Confusing notice with consent
- Correction
- Notice communicates the transfer; consent supplies required approval.
- Trap
- Forgetting defenses
- Correction
- Existing contract defenses and limitations ordinarily follow the assigned interest.
- Trap
- Assuming all contracts are freely assignable
- Correction
- Test express restrictions, personal services, special trust, material burden, statute, and public policy.
- Trap
- Calling an assignment a deed
- Correction
- A contract assignment transfers the buyer's contract interest; the closing deed conveys the real-property interest.
- Trap
- Finding novation without all parties
- Correction
- Illinois novation requires agreement of all parties to the valid new contract.
- Trap
- Finding novation without extinguishment
- Correction
- The old obligation must be discharged, not merely supplemented with another possible performer.
- Trap
- Treating assignment as a license loophole
- Correction
- Apply the current Illinois definition of licensed activity to repeated dealing in assignable real estate contracts.
Can you separate the terms in a new fact pattern?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. A buyer transfers a permitted contractual right to another buyer, but the seller never releases the first buyer. What is the best classification?
- Assignment
- Novation
- Rescission
- Specific performance
Show answer and explanation
Answer: Assignment
The right moved, but the facts do not show mutual substitution and extinguishment of the original buyer's obligation.
2. What fact most strongly supports novation rather than assignment?
- All required parties agree that a valid substitute replaces and releases the original obligation
- The assignee receives notice of closing
- The assignor keeps a copy
- The contract contains an inspection contingency
Show answer and explanation
Answer: All required parties agree that a valid substitute replaces and releases the original obligation
Novation requires mutual agreement, a valid new contract, and extinguishment of the old obligation.
3. Which term describes transferring the performance of a contractual duty to another person?
- Delegation
- Assignment
- Recording
- Ratification
Show answer and explanation
Answer: Delegation
Contract rights are assigned, while performance duties are delegated.
4. What position does an assignee generally occupy after a valid assignment?
- The assignor's position, subject to the transferred right's existing limits and defenses
- A position with greater rights than the assignor
- The position of a county recorder
- The position of an automatic title owner
Show answer and explanation
Answer: The assignor's position, subject to the transferred right's existing limits and defenses
Illinois authority says the assignee stands in the assignor's shoes and receives no greater interest.
5. An assignee promises to perform, but the obligee does not release the assignor. Which statement is safest?
- The assumption does not by itself prove a novation
- The assignor is automatically discharged
- The contract is automatically void
- The assignee receives title by deed immediately
Show answer and explanation
Answer: The assumption does not by itself prove a novation
A novation additionally requires the agreed substitution and extinguishment of the old obligation.
Where do these ideas appear on the outline?
- Topic
- Assignment
- What to know
- Transfer, identifiable right, contract interest, assignor, assignee, obligor, intent, present transfer, consideration, notice, consent clause, defenses, and standing in the assignor's shoes
- Best exam move
- Choose assignment when a contractual benefit changes hands without a proven release of the original party's duties.
- Topic
- Novation
- What to know
- Substituted contract, old obligation, new obligation, original party, substitute party, mutual agreement, all parties, extinguishment, release, valid new contract, consideration, intent, and proof
- Best exam move
- Choose novation only when the parties agree to replace and extinguish the original obligation.
- Topic
- Assignor
- What to know
- Owner of right, transferor, contract interest, intent to transfer, retained duties, warranties, notice, signature, authority, release request, continuing liability, and records
- Best exam move
- Identify the person giving away the contractual right, then ask what obligations that person still owes.
- Topic
- Assignee
- What to know
- Recipient, transferred right, same position, subject to defenses, no greater rights, assumption, performance, due diligence, notice, proof of assignment, enforcement, and closing
- Best exam move
- Give the assignee the transferred right, but do not improve it beyond what the assignor possessed.
- Topic
- Obligor and obligee
- What to know
- Duty owed, performance recipient, seller conveyance, buyer payment, notice, consent, defense, changed risk, substituted debtor, release, and enforcement
- Best exam move
- Find who must perform and who is entitled to that performance before tracing any transfer.
- Topic
- Assignment of rights
- What to know
- Purchase right, lease interest, rent, proceeds, claim, option, beneficial interest, identifiable subject, whole or partial transfer, restrictions, and effective date
- Best exam move
- Use assignment vocabulary for benefits and rights rather than for burdens and duties.
- Topic
- Delegation of duties
- What to know
- Performance, delegate, delegator, duty, personal skill, trust, material interest, continued liability, breach, supervision, and contract restriction
- Best exam move
- A duty can be delegated in an appropriate case, but delegation alone does not release the delegating party.
- Topic
- Assumption
- What to know
- Assignee promise, accept duties, assignment and assumption agreement, direct obligation, performance, third-party rights, no automatic release, consent, and novation analysis
- Best exam move
- Treat assumption as the new party's promise to perform, then separately test whether the old party was discharged.
- Topic
- Consent to assignment
- What to know
- Contract clause, prior written consent, reasonable standard, absolute prohibition, waiver, notice, seller approval, landlord approval, lender approval, and enforceability
- Best exam move
- Read the clause before assuming that the transfer is freely permitted or automatically void.
- Topic
- Notice of assignment
- What to know
- Obligor, payment direction, proof, effective transfer, double payment risk, acknowledgment, delivery, timing, record, and defense
- Best exam move
- Keep notice separate from consent: notice informs, while consent authorizes when the agreement requires it.
- Topic
- Assignable purchase contract
- What to know
- Executory contract, buyer interest, right to acquire, before closing, assignee, seller duties, purchase price, earnest money, contingencies, clause, consent, and closing documents
- Best exam move
- Illinois authority recognizes that executory real estate purchase contracts may be assigned, subject to the agreement and applicable limits.
- Topic
- Nonassignable interests
- What to know
- Personal services, special trust, unique skill, materially changed duty, increased burden, increased risk, impaired return performance, express restriction, statute, and public policy
- Best exam move
- Reject a blanket assignment answer when the identity of the performer or added burden matters to the bargain.
- Topic
- Assignee subject to defenses
- What to know
- Same shoes, existing defense, breach, fraud, failure of condition, setoff, limitation, no greater interest, contract expiration, and proof
- Best exam move
- The assignee normally takes the assigned interest with the weaknesses and defenses already attached to it.
- Topic
- Four novation elements
- What to know
- Previous valid obligation, later agreement, all parties, extinguishment, valid new contract, consideration, authority, definite terms, assent, and burden of proof
- Best exam move
- Do not label the transaction a novation until all four Illinois elements are supported.
- Topic
- Release and extinguishment
- What to know
- Discharge, old debtor, original buyer, original tenant, no continuing liability, express release, implied intent, substituted duty, complete agreement, and evidence
- Best exam move
- The release of the replaced obligation is the fastest discriminator between novation and ordinary assignment.
- Topic
- Writing and signature
- What to know
- Interest in land, Statute of Frauds, contract clause, signed assignment, written consent, electronic record, electronic signature, attribution, authority, initials, true copy, and retention
- Best exam move
- Use a written, signed document that identifies the contract, transferred interest, parties, consent, and any intended release.
- Topic
- Illinois licensed activity
- What to know
- Assignable purchase contracts, options, pattern of business, buying, selling, marketing, improvements, two or more occasions, 12 months, license definition, exemptions, and discipline
- Best exam move
- Do not confuse a contract-law assignment with permission to conduct a regulated contract-dealing business without a license.
- Topic
- Licensee document control
- What to know
- Signed transaction document, addition, deletion, alteration, written consent, all signatories, initials, true copy, 24 hours, approved form, attorney referral, and transaction file
- Best exam move
- Document the parties' authorized transfer accurately and do not manufacture consent or release language.
How do you make the distinction stick?
- Session
- Session 1
- Focus
- Name every role
- Proof you are ready
- Label assignor, assignee, obligor, obligee, delegator, delegate, original party, and substitute party in 20 scenarios.
- Session
- Session 2
- Focus
- Separate rights from duties
- Proof you are ready
- Classify 25 transfers as assignment, delegation, assignment plus assumption, or neither.
- Session
- Session 3
- Focus
- Test assignment limits
- Proof you are ready
- Resolve 15 consent, no-assignment, personal-service, material-risk, notice, and defense questions.
- Session
- Session 4
- Focus
- Prove novation
- Proof you are ready
- Find the original obligation, all-party agreement, extinguishment, and valid substitute in 15 fact patterns.
- Session
- Session 5
- Focus
- Apply Illinois authority
- Proof you are ready
- Explain YPI 180 N. LaSalle, Pielet, Illinois written-document rules, and the current assignable-contract licensing provision in plain language.
- Session
- Session 6
- Focus
- Run the R-E-L-E-A-S-E test
- Proof you are ready
- Score at least 90% and identify the release evidence or its absence for every missed question.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
Turn the comparison into a test-day decision
From concept to decision
Drill this topic, then review the explanation
Pass Illinois gives you original national and Illinois questions, topic-by-topic study, clear explanations, timed practice, flashcards, progress tracking, and Math Coach. Start free, find the weak distinction, and focus the next session there.
Questions students ask about Assignment vs. Novation in Real Estate
What is an assignment in a real estate contract?
An assignment transfers an identifiable contractual right or interest from the assignor to the assignee. The assignee generally steps into the assignor's position for the right transferred and receives no greater right than the assignor had. Assignment does not by itself prove that the original party was released from unperformed duties.
What is a novation in real estate?
A novation is a substituted contract. By mutual agreement, the parties replace an existing debtor, creditor, or obligation with a new one and extinguish the old obligation. Illinois authority identifies four elements: a previous valid obligation, agreement of all parties to the new contract, extinguishment of the old contract, and a valid new contract.
What is the main difference between assignment and novation?
Assignment transfers a right or contract interest, but the original obligor is not automatically released from remaining duties. Novation substitutes a new party or obligation with the required agreement and releases the replaced obligation. On the exam, ask whether the original party remains liable.
Who are the assignor, assignee, and obligor?
The assignor transfers the right. The assignee receives it. The obligor is the person who owes the performance connected to that right. If a buyer assigns the right to purchase, the original buyer is the assignor, the new buyer is the assignee, and the seller is the obligor with respect to the duty to convey under the contract.
Are real estate purchase contracts assignable in Illinois?
Illinois appellate authority states that executory contracts for the purchase of real estate may be assigned. Always read the contract, however. A no-assignment or consent clause, a material change in the other party's burden or risk, the nature of the promised performance, or another governing rule can affect a particular transfer.
Does an assignment also transfer contract duties?
Rights are assigned and duties are delegated. A document assigning the whole contract may also include a delegation or assumption of duties, depending on its language and the parties' intent. Even when the assignee promises to perform, the original party normally remains responsible unless the obligee agrees to a release through a novation or another valid discharge.
Does a novation require consent from everyone involved?
Yes. Illinois courts describe a novation as a mutual agreement and require the agreement of all parties to the new contract. That includes the party entitled to the original performance, the party being replaced, and the substitute party when a debtor or creditor is changed.
Is an assignment and assumption agreement automatically a novation?
No. Assumption shows that the assignee agreed to take on duties, but novation additionally requires the obligee's agreement to substitute the new party and extinguish the old obligation. Look for clear release language and the conduct or signatures of all required parties rather than relying on the form's title.
Can a brokerage agreement be assigned like a purchase contract?
Do not assume it can. Contracts based on personal trust, judgment, skill, or a particular person's performance are commonly treated differently from ordinary transferable business rights. Read the brokerage agreement, licensing rules, consent requirements, and facts. The exam often uses personal services as an exception to broad assignment language.
Are these official PSI exam questions?
No. They are original questions aligned to the national Contracts outline effective June 24, 2026 and current Illinois authority. The PSI bulletin, Illinois statutes, administrative rules, and official Illinois court opinions were reviewed through August 1, 2026.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- YPI 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, Illinois Appellate Court assignment rules for executory real estate purchase contracts
- Pielet v. Pielet, 2012 IL 112064, Illinois Supreme Court novation definition and elements
- Crest Hill Land Development, LLC v. Conrad, 2019 IL App (3d) 180213, valid novation and consideration
- 225 ILCS 454, current Illinois Real Estate License Act provisions involving assignable real estate contracts
- 740 ILCS 80/2, current Illinois Statute of Frauds for interests in land
- 68 Illinois Administrative Code 1450.775, current Illinois written-agreement and transaction-document rules
- 815 ILCS 333, current Illinois Uniform Electronic Transactions Act
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.
Editorial status
Checked against primary sources
The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.