Novation agreements are used to transfer the rights and obligations of one party under a contract to another party, whilst the other contracting party remains the same. The new party may be said to “step into the shoes” of the departing party.
We supply two different novation agreement templates:
Under the standard document, contractual rights and liabilities subsisting from some point in time after the original execution of the contract are assigned to the new party. Under the ab initio document, all historic rights and liabilties are transfered to the new party.
All three parties – the transferor, the transferee, and the counterparty (i.e the other contracting party) – need to sign the novation agreement.
Novation agreements may be necessary because of legal and contractual restrictions on the assignment of contractual rights and, especially, obligations.
Corporate transactions such as mergers and acquisitions often involve the novation of large number of contracts.