In the absence of the flexibility offered by replacement contracts and financing agreements, parties to a contract would remain stuck in potentially undesirable business situations, without having legal problems or withdrawing from the business. Both methods allow for flexibility and offer partners a chance that they may not otherwise have. There are some similarities between a replacement contract and a novelty, the most important being that they both involve a change in the partnership. However, the nature of this modification of a replacement contract is in the contract itself, while the change in innovation rests with the parties involved. Among the main differences between innovation contracts and replacement contracts is the fact that a replacement contract immediately reduces the previous right that is taken into account in the new contract. As a result, the original claim can no longer be invoked, as no explicit agreement to the contrary has been reached. A replacement contract was created to circumvent the unsatisfactory rules that until recently governed the implementation agreements. A replacement contract is entered into between the parties to a previous contract. A replacement contract replaces a previous contract and also reduces the old contract.

A replacement contract differs from innovation because innovation requires the replacement of the original debtor from a third party who is not a party to the original agreement; If the subject accepts the third party, the contract is immediately discharged. On the other hand, Novation is essentially an agreement whereby a third party replaces one of the original parties and releases the replaced party from any obligations it may have under the agreement. The main driver of innovation is that the original treaty remains unchanged and remains in force. Novation is important when conducting transactions of any kind in South Africa, if existing contractors wish to transfer their contractual obligations to a third party. This is sometimes referred to as a “transfer contract.” A replacement contract occurs when two or more parties participate in a joint venture and find that the current agreement is no longer relevant or effective. In this case, the parties replace the original contract with a new contract.