Templates

Novation Agreement Template

A novation agreement transfers contractual rights and obligations from one party to another. With the consent of all three parties, a new agreement is created as the incoming party steps into the role of the outgoing party, relieving them from future obligations and liabilities related to the original agreement. Read more
Legislation GB-EAW
Topics Updated by a lawyer: 12 May 2025

What is a novation agreement?

The basics: This novation agreement template can be used to transfer the rights and obligations from one party to an agreement to another.

The parties: Novation typically involves three parties: the remaining party, the incoming party, and the outgoing party. The incoming party steps into the shoes of the outgoing party, releasing the outgoing party from future responsibilities and liabilities related to the agreement.

The important stuff: Novation requires the consent of all three parties to replace one party to the original agreement for a new party. Through novation, the outgoing party is released from the agreement, and a new agreement is formed using the original agreement's terms but substituting the incoming party for the outgoing party.

What are the benefits of using this novation agreement template?

Novation provides a clean break: As the outgoing party is fully released from future obligations and liabilities, this gives the parties a clean break from the original agreement, whilst also creating a new agreement based upon the same terms as the original agreement. It releases the outgoing party from ongoing contractual commitments and the incoming party takes responsibility for those commitments. This creates a new contractual relationship between the remaining party and the incoming party, officially removing the outgoing party.

Records consent in writing: Novations can be complicated, and consent is a crucial aspect of novation. As it involves the substitution of parties, impacting contractual rights and obligations, each party's agreement to the novation is necessary to avoid disputes and ensure a smooth transition. Using this novation agreement template provides a structured framework for recording written consent from all involved parties. This ensures clarity, reduces the likeliness of misunderstandings, and serves as a legal record of each party's agreement to the novation, mitigating the risk of disputes in the future.

Can be drafted as a simple contract or deed: This novation agreement template can be executed as either a simple contract or deed. If the original agreement is a deed, then it will require a deed of novation to novate the original agreement. Drafted by qualified lawyers, Docue's novation agreement includes options to choose between a simple contract or a more formal deed, ensuring a tailored and legally robust solution for a diverse array of legal agreements that need to be novated.

When would you need to use a novation agreement?

There are several scenarios where parties may need to substitute or replace a party for a new party, for example:

Business sales: Where a company has been sold and the buying company takes over the ongoing contracts of the business. In this scenario, a novation agreement can facilitate the transfer of contractual obligations, rights and liabilities from the company that has been taken over to the buying company.

Change in service providers: If a business decides to change service providers and the service provider consents to this change, then a novation agreement can transfer the contractual obligations and liabilities of the service agreement to the new service provider.

Change in financing arrangements: If there's a change in financing institutions or lenders, a novation agreement can be used to transfer the relevant financial agreements to the new party.

What is the difference between novation and assignment?

The key difference between assignment and novation is that assignment only transfers the benefits of an agreement to a new party, with the original party remaining responsible for other contractual commitments. Novation, on the other hand, transfers both benefits and liabilities to the third party, providing a comprehensive substitution, relieving the original party from all responsibilities under the agreement.

Novation gives the parties clean break by replacing the original party entirely, allowing a new party to take over all obligations, benefits, and liabilities under the agreement. This ensures the original party is fully released from the contract, reducing the risk of disputes or uncertainties in the future.

What if I need to vary other terms of the agreement?

If you need to vary other terms of an agreement without replacing a party, check out our variation agreement.

Assumptions

This novation agreement template assumes that the parties are incorporated in the UK, and that English law applied to the original agreement, and applies to this novation agreement.

Why Docue?

Simple: With Docue, you can create a top-quality document in minutes using this novation agreement template. The template includes model wording designed by qualified lawyers to help you draft the novation agreement yourself and tailor it to your needs.

All-in-one-place: Our cutting-edge technology combined with our lawyer-made templates allow you to create, customise, e-sign, store and manage your documents all in one place with just a few clicks.

Transparent pricing: At Docue, we believe in transparent and cost-effective pricing without any hidden fees. Check out our pricing page to find a subscription that best suits your business.

Sign up with Docue today and see how easy it can be to create professional-quality agreements in no time.

Tags: novation agreement template, deed of novation, novation, novation agreement sample, novation agreement example, novation contract, contract novation

Legislation GB-EAW
Topics Updated by a lawyer: 12 May 2025

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