Q&As

Can a deed of novation be effective if the incoming party has not executed the deed but the remaining party and the outgoing party have?

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Published on LexisPSL on 17/01/2017

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • Can a deed of novation be effective if the incoming party has not executed the deed but the remaining party and the outgoing party have?
  • Consent
  • Consideration
  • Form of novation
  • Effectiveness of the deed and other circumstances

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. The requirements of a novation are both consideration and consent.

From an English law perspective, matters to consider in evaluating the effectiveness of the deed of novation include (but may not be limited to) the following:

Consent

'The consent of all the parties is required for novation (compare an assignment which can be effected without consent unless the contract provides otherwise). Novation will also bind the incoming party to the relevant contractual burdens. Consent is a question of fact and must

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