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Novation is the method by which the parties to an existing contract 'transfer' the rights and obligations of that contract to a third party. Novation is not strictly a transfer of rights and obligations but a discharge of the rights and obligations between contracting parties and a recreation of them with a third party (replacing an original contracting party) and one (or more) of the contracting parties to the original contract. A novation requires consideration and consent.
A novation can be distinguished from an assignment which transfers the benefits of a party to another party without extinguishing the original contract which remains in force (with or without any agreed amendments).
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Preparing a building contract for signature—checklist This Checklist can be used when preparing a building contract for signature. It is designed to help avoid errors when preparing or checking construction documents before they are signed by the parties and completed. • Consistency with other documents From the outset, liaise with the member of the professional team responsible for preparing contract documents such as Preliminaries and Employer’s Requirements to ensure that these are consistent with the schedule of amendments and accurately reflect the intentions of the parties. For more on drafting a building contract, see: Drafting a building contract/schedule of amendments—checklist. • Details of the parties Include full details for all contracting parties—the full company name and address, plus the registered company number (if any) as company names may change in future. Confirm the details are correct at Companies House (if applicable). • Contract Particulars Review the Contract Particulars (where a JCT contract is being used), or Contract Data (where an NEC contract is used), or other relevant contract details section...
Power purchase agreement (PPA)—Checklist Power purchase agreements (PPAs) and consequently the checklist issues that arise will vary depending on a number of factors, including the type of energy generating technology utilised and, particularly, whether or not feedstock or fuel is required for operation of the completed facility. Whether the PPA, a short-term trading arrangement or a longer-term arrangement needed to underpin financing will also have a significant impact. This Checklist assumes a ‘conventional’ PPA where the counterparty is a licensed supplier. There are other variants, including corporate PPAs where the counterparty is an end-use customer, possibly connected to the generating facility by a direct wire. For more information about corporate PPAs, see Practice Note: Corporate Power Purchase Agreements—an introduction to structuring power purchase arrangements between large energy users and remotely located generators. What is/check the duration of the agreement? Where a PPA is required to underpin the external financing of a new generating facility, the term of PPA should coincide, so far as practicable, with the terms of any loans...
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NEC contracts—design Some suites of construction contracts include separate forms of contract to be used where the contractor is to take responsibility for designing, as well as building, the works—the JCT suite, for example, contains the well-known JCT Design and Build form. The NEC3/NEC4 suites of contract take a different approach and do not include a separate design and build contract. The NEC4 suite introduced the Design Build and Operate (DBO) contract, but this form, as the name suggests, is intended for use where the employer wishes the contractor to design and build, but also operate/maintain, an asset for a period of time. The NEC Engineering and Construction Contract (ECC) is intended to be suitable for use whether the Contractor has no design responsibility, responsibility for the whole design, or for any part of the design of the works. NEC envisage that the requirements as to design will be set out in the Works Information (in NEC3 terminology)/Scope (under NEC4). This Practice Note looks...
Claims for rectification This Practice Note outlines when a claim for rectification may be appropriate, what you need to establish to succeed on such a claim and what evidence may be admissible in support. In Tartsinis v Novana, Leggatt J as he then was questioned the authority of Lord Hoffman’s dicta in Chartbrook v Persimmon Homes (as followed in Daventry v Daventry), with regard to whether the court should apply an objective or a subjective test when analysing claims for rectification. In 2019, Leggatt LJ, gave the Court of Appeal’s unanimous decision in FSHC Group Holdings Ltd v Glas Trust Corporation confirming that the test for the relevant intention of the parties to the document sought to be rectified is a subjective test. In summary: ‘176. [...] before a written contract may be rectified on the basis of a common mistake, it is necessary to show either (1) that the document fails to give effect to a prior concluded contract or (2) that, when they...
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Short form of consultant’s appointment This Agreement is made on the [insert date] day of [insert month and year] Parties 1 [Insert Employer name] (Company Registration No. [insert number] whose registered office is at [insert office]) (the 'Employer' which term shall include all permitted assignees or other transferees under this Agreement); and 2 [Insert Consultant name] (Company Registration No. [insert number] whose registered office is at [insert office]) (the 'Consultant') Whereas (A) The Employer has entered into or proposes to enter into a contract with [insert name of contractor] of [insert contractor's address] for the [design and] construction of a [insert brief description of the project] (the ‘Project’) at [insert location of site] (the 'Building Contract'). (B) The Employer wishes to appoint the Consultant to perform the services set out in Schedule 1 (the 'Services') in accordance with the Agreement It is hereby agreed as follows 1 Definitions and Interpretation 1.1 In this Agreement the following expressions shall have the following meanings: [Beneficiaries • any and all...
Guarantee and indemnity—seller obligations—private M&A—asset purchase This Deed is made on [insert day and month] 20[insert year] Parties 1 [insert name of guarantor entity] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (the Guarantor); and 2 [insert name of the buyer] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (the Buyer). BACKGROUND: (A) The Buyer has agreed to purchase the Business as a going concern pursuant to the terms of the APA. (B) The Guarantor has agreed to guarantee the performance by the Seller of its obligations and liabilities under the APA and provide the Buyer with an indemnity in respect of such obligations of the Seller. The parties agree: 1 Definitions and interpretation 1.1 In this Deed, unless otherwise provided: APA • means the asset purchase agreement between the Buyer and the Seller made on or...
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How might the European Commission proposal for new conflict of law rules for assigned claims impact the secondary loan market? Summary This Q&A refers to the European Commission’s proposal for a Regulation on the law applicable to the third-party effects of assignments (the Proposal) published on 12th March 2018, which could have an impact on the market for trading participations in syndicated and bilateral loans. Both of the Loan Market Association (LMA) and the City of London Law Society made representations asking for the Proposal to be shelved or at least amended to accommodate current market practice in the secondary loan market. Their representations are available on their respective websites. It is fair to say that in its original form the Proposal would have disrupted the secondary loan market by making due diligence on the part of a buyer much more complicated for the reasons given below. The UK indicated on 9 July 2018, shortly after publication of this Q&A, that it would not opt in...
Pursuant to an agreement for lease, a landlord is constructing a building for the tenant and has provided collateral warranties to it from the professional team. The landlord is now intending to mortgage the freehold simultaneously with completion of the lease at practical completion. Does the landlord need to procure new collateral warranties in favour of the bank as presumably the tenant wouldn’t permit assignment of those in its favour? Also, there is a novation agreement attached to the consultant’s letter of appointment (allowing for novation to the contractor)—how will this sit with the lender? This Q&A considers the likely approach that a lender will take in respect of collateral warranties and novation, in the context of a landlord constructing a building to be leased to a tenant, where the landlord wishes to obtain a mortgage over the freehold. As a result of the doctrine of privity of contract, collateral warranties are often necessary in construction projects in order to protect third parties with an interest...
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Energy analysis: On 8 October 2024, the North Sea Transition Authority (NSTA) released updated guidance for the assignment of offshore petroleum production licences in the UK Continental Shelf (UKCS) (the Guidance). Publication of the Guidance followed a consultation launched on 28 March 2023 inviting industry feedback from licensees, infrastructure owners and potential future investors. The aim of the Guidance is to streamline the period between signing and completion of M&A transactions in the UKCS, reducing potentially costly delays and improving deal certainty, while assisting in the development of a stable regulatory system which encourages investment in both oil and gas and energy transition projects in the UKCS. As background to the Guidance, the NSTA recognises the role M&A plays in the UKCS, which includes the need for ‘new capital, new ideas and new vigour’ to support the central obligation of the ‘OGA Strategy’, to maximise economic recovery of petroleum while assisting the Secretary of State in meeting the net zero target.
This week's edition of Commercial weekly highlights includes: analysis of the decision in Grain Communications v Shepherd Groundworks which considered whether an employer’s decision to postpone works was a valid exercise of its right to instruct variations or a breach of contract, announcement of the publication of the decision in Sea Consortium PTE Ltd (trading as X-Press Feeders) v Bengal Tiger Line PTE Ltd which considered whether slot charterers fell within the definition of ‘charterer’ in Article 1(2) of the Convention on Limitation of Liability for Maritime Claims 1976, and news that the Advertising Standards Authority has published its latest rulings.
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