A is corrent because a novation is a three-party agreement between the contracting parties and a third party, whereby one of the contracting parties is discharged from his/her duty and the third party is substituted in the discharged party’s place. In this case, all three parties agree to discharge the old contracts between Fiore and Lutz, and Lutz and Bing, by the creation of a new contract between Fiore and Bing. The new contract is a novation.
B is incorrect because an accord and satisfaction is an agreement by two parties to terminate an existing contract between them by substituting a new agreement. It does not involve substitution of parties as does a novation.
C is incorrect because Fiore gives consideration in the form of a promise to pay Bing, and Bing gives consideration by promising to forego his legal right to proceed against Lutz.
D is incorrect because Bing is bound by Fiore’s promise to pay and does not, therefore, have the option to void the agreement.
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