When your business circumstances change, it's often necessary to update existing contracts. A Novation Agreement enables parties to transfer contractual responsibilities seamlessly from one party to another, ensuring continuity and legal clarity.

What is a Novation Agreement?

A Novation Agreement is a legal document used to substitute one party in an existing contract with a new party. It effectively transfers all rights, obligations, and liabilities from the original contracting party to another, with the consent of all involved parties.

Unlike an assignment, novation completely replaces the original party and creates a new contractual relationship.

Key Benefits of a Novation Agreement

• Clarity and certainty: Ensures a clear transition of contractual duties.
• Continuity: Maintains the original terms and conditions without interruption.
• Legal protection: Clearly documents each party's consent, minimising future disputes.

How to Create a Novation Agreement Using Bind

Creating a Novation Agreement with Bind is quick and straightforward:

1. Visit Bind and tell Bind you need a “Novation Agreement".
2. Answer simple questions about the involved parties, the original agreement, and key dates.
3. Review the auto-generated Novation Agreement and customise as needed, either yourself or with AI assistance.
4. Digitally sign the agreement and effortlessly send it to other parties for signatures.
5. Securely store and manage the signed document within Bind.

What Should a Novation Agreement Include? 

A comprehensive Novation Agreement typically includes:

• Names and addresses of the original, new, and remaining parties.
• Details of the original contract (e.g., agreement name, date signed).
• Terms clearly stating the transfer of rights and obligations.
• A clause releasing the original party from further liabilities.
• Confirmation that all original terms remain effective unless explicitly modified.
• Standard miscellaneous provisions (such as confidentiality, indemnity, governing law).

Common Questions About Novation Agreements

When is a novation required?
A novation is necessary when transferring complete contractual responsibilities, often following business restructures, mergers, or acquisitions.

Can I simply assign my rights instead of novating?
Assignment transfers only rights—not obligations. Novation is needed to transfer both rights and obligations fully.

Do all parties need to agree to a novation?
Yes, explicit consent from all involved parties (original, new, remaining) is legally required.

Risks of Not Having a Novation Agreement

Without a proper Novation Agreement, the original party may remain liable for obligations they intended to transfer, causing potential disputes, confusion, or even legal action. The remaining party may also refuse performance from the new party if a formal novation isn't completed.

Novation Agreement – free template

This Novation Agreement (the "Agreement") is made on [Date] (the “Effective Date”) between:

• Original Party
  First Name Last Name / Business Name, Company Number, Address, Postal Code, City, Country.
• New Party
  First Name Last Name / Business Name, Company Number, Address, Postal Code, City, Country.
• Remaining Party
  First Name Last Name / Business Name, Company Number, Address, Postal Code, City, Country.

Original Agreement
[Name of Original Agreement] dated [Date].

Novation
The Original Party transfers all rights and obligations under the Original Agreement to the New Party, who accepts such transfer.

Assumption of Obligations
From the Effective Date, the New Party fully assumes the Original Party’s obligations under the Original Agreement.

Release
The Remaining Party releases the Original Party from further obligations under the Original Agreement.

Continuity
All other terms of the Original Agreement remain effective.

Governing Law
This Agreement is governed by the laws of England and Wales, with jurisdiction assigned exclusively to its courts.

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Remember, Bind is the easiest way to quickly and accurately create up-to-date contracts and documents from start to finish. Create your own customised Novation Agreement effortlessly using Bind.