Deed of NovationA Deed of Novation transfers a party's contractual rights and obligations to a third party, upon the consent of those two parties and the other party to the contract.
A novation refers to an arrangement where parties substitute an existing contract and replace one party to the agreement. As a result, a new, third party enters the picture. A Deed of Novation may be used when there is a change in ownership or when a contract is transferred from one party to another. The rights and obligations of the original contract are transferred over to a new contract. The third party will hence incur liability for breaches of the contract.
In this way it is different to assignment, where only the rights under a contract are transferred over. For a deed of assignment, see Deed of Assignment.
A Deed of Novation can help ensure a smooth and seamless transfer of rights and obligations from one party to another.
Use the Deed of Novation if:
You want to substitute an existing contract to replace one party to the agreement.
What does the Deed of Novation cover?
The conditions precedent that must be met before novation becomes effective;
The distribution of any expenses in relation to this deed between the parties; and
The option to execute this deed across counterparts.