Whenever a friend gives up a phone number, you should make sure to delete the number from your phone address book. Otherwise, you may incorrectly identify an account in WhatsApp as your friend's account, when the account in fact belongs to the new phone number's owner.
WhatsApp exclusively uses a phone number to identify an account and we display the names you have saved for the number in your address book. The names you see in your WhatsApp Favorites list (Contacts tab on Android), in a specific chat and in the Contact Info screen inside WhatsApp are not created within the application.
WhatsApp Support Team