A "novation" is often defined generally as "the subsitution of a new obligation for an exsting one." (See.e.g., Cal. Civ. Code Section 1530.) In this sense, any modification of a contract could be thought of as a novation. However, the term novation is usually used in the narrower sense of a three-party agreemeent in which one party is substituted for another in a contract, relieving an existing party of its obligation under the contract and obligating a new party in its place.
The concept of novation typically arises in corporate law in connection with pre-incorporation liability. For example, a promoter enters into a corporation on behalf of a non-existent corporation, for which the promoter is often personally liable. When the corporation comes into existence, it may adopt the contract as its own, but that adoption by itself will generally be sufficient only to bind the corporation, not to also release the promoter. In order to bind the corporation and release the promoter, parties may execute a novation, which is a three party agreement (promoter, corporation, and creditor) where all three parties agreee that the corporation is substituted for the promoter as the obligor on the contract. The key here is that the third party creditor must consent in order to effect a novation, which he or she may not have any incentive to do unless the corporation is at least as creditworthy than the promoter.
The issue in cases therefore often depends on whether there has been an implied novation from corporate conduct, such as the adoption of the contract or acceptance of benefits under it. Courts often require either an express agreement for a novation or some heightened level of proof for an implied novation, such as clear and convincing evidence.