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GLOSSARY

Novation definition

Copyright © 2025 LexisNexis

/nə(ʊ)ˈveɪʃ(ə)n/

Published by a LexisNexis Commercial expert

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.

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).

Commercial

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

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View the related checklists about Novation

Drafting a building contract/schedule of amendments—checklist

Drafting a building contract/schedule of amendments—checklist Once the procurement route and form of building contract has been selected (see Practice Note: Choosing the right procurement method—construction projects) the employer should consider the following matters and incorporate the appropriate drafting in the building contract particulars and schedule of amendments. This Checklist assumes that the parties are using a standard form of building contract, such as a JCT form, and that the employer is proposing the first draft including the completed contract particulars and a schedule of amendments, which amends the standard terms. This list is not exhaustive, however, and there may be other project specific matters/risks that need to be taken into account: Contractual matters • Carry out due diligence on the contractor The employer needs to carry out due diligence on the contractor at the outset to determine whether its financial position is acceptable. Confirm the contractor’s company number and name at Companies House. • Obtain consultants’ details Confirm the full details of the consultants engaged by the employer; some...

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Commercial contracts in difficult times—resources—checklist

Commercial contracts in difficult times—resources—checklist This Checklist of resources brings together key content for commercial practitioners advising a business trading in difficult times. It covers considerations when drafting contracts, building resilience into supply chains, price and payment issues, performance problems and dealing with disputes. A wide range of external factors may cause problems for businesses including, for example: • rising prices and economic instability, such as increased energy supply prices and their knock-on effect, inflation and currency fluctuations • supply chain problems, for example, those caused by the war in Ukraine, import/export requirements and border delays since the departure of the UK from the EU, shortages of goods and labour and strikes • climate change is also affecting the supply chain in many ways, from rising temperatures and weather extremes that impact agriculture and transportation, to natural disasters that can disrupt entire regions • the rapid growth of e-commerce and the explosion of online shopping is putting a huge strain on supply chains, as retailers and manufacturers struggle...

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View the related practice notes about Novation

Funding an employee benefit trust

Funding an employee benefit trust This Practice Note covers the following issues in relation to the funding of an employee benefit trust (EBT): • practical aspects of funding an EBT • financial assistance—the background • financial assistance—the current position • relevance of financial assistance to EBTs • financial assistance—exemptions • the employees’ shares scheme exemption • consequences of non-compliance of the financial assistance provisions • tax implications for close companies which fund EBTs, and • corporation tax relief in respect of EBT funding Practical aspects of funding an EBT When an EBT is first set up, it needs to be provided with initial financing, as a trust cannot exist without initial trust assets. It is common for a nominal amount, for example £100, to be settled on the trustee in order to establish the EBT (for further details, see Practice Note: Setting up an EBT). However, after the EBT has established, other funding can be provided. This may be by way of: • voluntary contribution • loan...

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Amending security documents

Amending security documents Reasons for amending security documents and key risks Reasons for amending a security document There are situations where parties may consider amending security documents. Common examples include: • the parties want to make changes to the obligations being secured • the chargee wants to assign or novate its security following a transfer of the debt • the parties want to charge additional assets or change the nature of an existing charge (eg from a floating charge to a legal mortgage), and/or • the parties want to correct a mistake or document an amendment to what has been agreed Parties may consider that amending a security document may be cheaper and easier than putting a new security document in place. Key risks of amending security documents New security?: Depending on the type of amendment, there is a risk that a liquidator or administrator could argue that new security has been created risking the security being set aside (see Practice Note: Introductory guide to antecedent transaction claims—considerations...

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Ireland—Notice of assignment of contractual rights and form of acknowledgement for an assignment by way of security: single company assignor—bilateral—specific monies

Notice of assignment of contractual rights from an assignor incorporated as a limited company in Ireland with a form of acknowledgement from the contract counterparty This is a Precedent Notice of Assignment which can be used to give notice of an assignment of contractual rights by way of security from an assignor to its contract counterparty. This drafting note explains the context in which this Precedent Notice of Assignment might be used as well as the features of this Precedent Notice of Assignment and the assumptions on which it is based. For information on taking security over contractual rights, see Practice Note: Ireland—Assignments by way of security. Parties to this Precedent Notice of Assignment This Precedent Notice of Assignment is designed for use in bilateral transactions (ie where there is only one lender) as opposed to syndicated transactions (ie where there is more than one lender). It has been drafted as being: • from a single security provider (defined as the ‘Assignor’) • to its contract counterparty and refers to...

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ccTLD domain name transfer agreement (.uk)

ccTLD domain name transfer agreement (.uk) This Agreement is made on [date] PARTIES 1 [insert name], a company incorporated in England and Wales, whose registered company number is [insert company number] and whose registered office is [insert address] (Transferor); and 2 [insert name], a company incorporated in England and Wales, whose registered company number is [insert company number] and whose registered office is [insert address] (Transferee), each of the Transferor and the Transferee being a party and together the Transferor and the Transferee being the parties. Background (A) The Transferor is the legal registrant of the Domain Name[s] defined below. (B) The Transferor has agreed to [sell and ]transfer the Domain Name[s] to the Transferee and the Transferee has agreed to [buy and] accept the registration of the Domain Name[s] in accordance with the terms of this Agreement. IT is agreed as follows: 1 Definitions and interpretation 1.1 In this Agreement: Business Day • means a day other than a Saturday, Sunday or bank...

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Dive into our 63 Precedents related to Novation

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How can parties be removed from consumer credit agreement regulated secured loans? Is a modification agreement required?

How can parties be removed from consumer credit agreement regulated secured loans? Is a modification agreement required? A joint consumer credit agreement creates joint and several liability for the debtors—see guidance Taking out a joint loan: what you need to know. See also Practice Note: Restrictions on varying or modifying consumer credit agreements, in particular part ‘Modifying agreements—are there any other points to note?’, under section: Restrictions on varying or modifying consumer credit agreements—What additional practical issues do firms need to consider?, which states: ‘Section 82(2) [of the Consumer

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If a contractor to a public contract awarded under the Public Contracts Regulations 2015 later merges with a third party, can the contracting authority novate the contract to the new entity? Are there any specific regulatory requirements or best practices for contracting authorities in this situation? Do the same rules apply for contracts awarded under the Public Contracts Regulations 2006?

If a contractor to a public contract awarded under the Public Contracts Regulations 2015 later merges with a third party, can the contracting authority novate the contract to the new entity? Are there any specific regulatory requirements or best practices for contracting authorities in this situation? Do the same rules apply for contracts awarded under the Public Contracts Regulations 2006? In answering this Q&A, we have limited our research to cover public procurement under the Public Contracts Regulations 2015, SI 2015/102 (PCR 2015). Modification of public contracts A merger situation may result in the identity of a contractor being amended, requiring agreements with that contractor to be novated to a new vehicle. In the case of a public contract, replacement of the contractor will be treated as a modification of the contract for the purpose of the PCR 2015, SI 2015/102. Under these rules, substantial modification to a public contract may, in effect, result in the award of a new contract which requires a new public...

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View the related News about Novation

Private Client weekly highlights—22 May 2025

This week’s edition of Private Client highlights includes: (1) the Law Commission publishes its recommendations to reform the Wills Act 1837; (2) Mr and Mrs K v Mr and Mrs Z, in which the court granted a parental order despite applicants’ advanced ages; (3) HMRC issues first individual tax avoidance stop notices under POTAS regime; (4) further analysis of Accuro Trust (Switzerland) SA v The Commissioners for HMRC, in which the court confirmed when a settlement is ‘made’ for the purposes of excluded property; (5) Louwman v Revenue and Customs Commissioners, a decision of the FTT holding that OIGs and AIPs arising in offshore protected trusts are not protected foreign source income; (6) Moran v Revenue and Customs Commissioners, where the taxpayer was found liable under the transfer of assets abroad regime for the rent-free occupation of a house; and (7) the Data (Use and Access) Bill reaches its final legislative stages.

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Tax weekly highlights—22 May 2025

This week's edition of Tax weekly highlights includes: (1) the Court of Appeal decision in Impact Contracting Solutions, (2) regulations being made to increase penalties for late payment of tax, (3) an ex-solicitor being given the first individual tax avoidance stop notice, and (4) News Analysis articles being published about the decisions of the First-tier Tax Tribunal (FTT) in Industria Umbrella and Powell.

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