Novation—why and how to novate a contract


Produced in partnership with Jon Chapman of Clarkslegal LLP
Practice notes
In-house

Novation—why and how to novate a contract


Produced in partnership with Jon Chapman of Clarkslegal LLP

Practice notes
In-house
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There may be times when, rather than assigning the benefit of an agreement to a third party, the original parties wish instead to end their obligations to each other under that agreement and, in effect, recreate it, with the third party stepping into the shoes of one of the original parties. This is the common form of novation.

When advising a client, you should be aware of the requirements for a valid novation and the consequences for the incoming party and the outgoing novation party when a novation takes place, which may be possible to avoid at the time of drafting the novation. A Precedent: Novation agreement—long form is provided.

For the purposes of this Practice Note, the parties to the novation are known as:

  1. •

    remaining party—(A)

  2. •

    outgoing party—(B)

  3. •

    incoming party—(C)

What is novation of a contract?

Novation occurs when A and B are party to an agreement and B 'transfers' its obligations and rights under the agreement to C, such that C can be said to 'step

Jon Chapman
Jon Chapman

Senior Consultant, Clarkslegal LLP

Jon is a senior consultant at Clarkslegal LLP. He has experience at senior level in private practice with Clifford Chance, as well as in-house in the energy and media industries. He has extensive experience in Corporate matters, such as mergers and acquisitions and corporate finance, and in Commercial matters, including asset sale and purchase agreements, intellectual property licensing, data protection, contracts for the supply of goods and services and franchising.

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Novation definition
What does Novation mean?

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.

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