Q&As

Is it possible to novate one agreement into two separate agreements? If so, will this then duplicate terms, eg liability (if the original liability is £1m, will this then duplicate the exposure)? Can this be achieved without seeking express consent but instead notifying the parties through a communications notification piece and via conduct?

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Published by a LexisNexis Commercial expert
Published on: 15 February 2021
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This Q&A assumes that a commercial agreement between business entities is the subject of potential novation.

Novation of one agreement into two agreements

Novation occurs when A and B are party to an agreement and B 'transfers' its obligations and rights under the agreement to C, such that C can be said to 'step into the shoes' of B, with a resulting contractual relationship coming into effect between A and C.

The effect of a novation is the extinction of the original contract, and its Substitution with a new contract, under which the same rights and obligations are to be enjoyed and performed but by different parties, with the outgoing party released from all future Liabilities under the contract.

Parties to a novation will usually be the same parties

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United Kingdom
Key definition:
Substitution definition
What does Substitution mean?

The process whereby a divorcing spouse with a poor national insurance contribution record may substitute this for the better national insurance contribution record of their spouse to increase their basic state pension. This is no longer available for spouses who reach state pension age after 5 April 2016.

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