Question 1

What's the difference between novation and assignment?

Accepted Answer

Assignment transfers rights while the original contract stays alive — you might still be liable. Novation kills the original contract and creates a new one — you're completely released. Novation requires all three parties to agree (original party, new party, and the counterparty). Assignment typically only needs two.

Question 2

Do all parties need to agree to a novation?

Accepted Answer

Yes — that's what makes novation different from assignment. The original party, the new party, and the counterparty all must consent. If the counterparty (like a client or landlord) doesn't agree, you can't do a novation. You'd be stuck with assignment, which doesn't fully release you.

Question 3

When should I use novation instead of assignment?

Accepted Answer

When you want a clean break. If you're selling a business, leaving a partnership, or transferring a lease and you want zero ongoing liability, novation is the way to go. It's more work than assignment (because you need everyone's consent), but it completely extinguishes your obligations.

Question 4

Can a landlord refuse novation of a lease?

Accepted Answer

Yes. Since novation requires all parties' consent, the landlord can refuse. They might prefer to keep you on the hook as a guarantor. If the landlord refuses novation, you can try assignment (if the lease allows it), but you may remain liable as a guarantor for the new tenant's obligations.

Question 5

Does novation need to be in writing?

Accepted Answer

It should be. While some jurisdictions might recognize an implied novation, proving it without a written agreement is risky and expensive. A written novation agreement clearly states: the old contract is terminated, the new party assumes all obligations, and the original party is released. Get it in writing.

Novation

Definition

In Practice

Common in these contract types

Related terms

Frequently asked questions about novation

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