Glossary
Novation
Novation replaces one contract with a new contract, swapping in a new party and releasing an old one. In England and Wales it needs the consent of everyone involved: outgoing, incoming and remaining. Unlike assignment, novation can move obligations as well as rights, because the original deal is discharged.
Last updated 28 October 2026
Agencies see novation when a client sells the brand, or when a freelancer’s limited company takes over a paper signed in a personal name. The remaining counterparty has to agree. A silent “we’ve moved this to our group company” email is not a novation. The clause that usually flags the issue is /clauses/assignment-and-subcontracting.
We would rather you novate on one shared page than forward a PDF with a new signature block taped on. Lex can draft a short novation that names the outgoing party, the incoming party, the remaining party, and the date the old contract ends. All three sign the same frozen wording.
How is novation different from assignment?
Assignment transfers rights — typically the right to be paid — and leaves the original party on the hook. Novation substitutes a new contract: rights and obligations move, and the outgoing party is released. If another company must perform and be owed the fee, that is novation. Subcontracting leaves the original supplier responsible.
Who has to consent to a novation?
All three: the party leaving, the party joining, and the party staying. Two-party consent is not enough, because the remaining party did not agree to look to someone new. Put consent in writing. An e-signature in counterpart is the usual path. Silence, new invoice details or a PO number is not consent.
When do agencies actually use a novation?
A sale of the client’s business, a switch from a sole trader to a limited company, or a group reorganisation where the contracting entity changes. If only the people doing the work change, assignment-and-subcontracting plus a named subcontractor is usually enough. Novate when the legal name on the paper has to change and the old name should drop off.
Does a novation need a deed?
Not if the new contract has consideration on all sides — incoming party takes the duties, outgoing party is released, remaining party accepts the swap. Where one side gives up rights and takes nothing back, parties sometimes use a deed. Ordinary paid work almost always has consideration.
A worked example
A freelancer who signed personally incorporates. The client agrees in writing that Greenleaf Studio Ltd takes over the services agreement from 1 June, is owed the unpaid invoices, and will finish the build. The freelancer is released from future duties. All three sign one novation on a shared link. Invoices from 1 June go to the company name.
How it shows up in a contract
Sample wording · our own drafting
With effect from [date], this agreement is novated from [Outgoing Party] to [Incoming Party]. [Remaining Party] consents. [Incoming Party] assumes all rights and obligations of [Outgoing Party] under the Contract. [Outgoing Party] is released from those obligations as from the Effective Date. The Contract otherwise continues on its terms.
In Plain English
From the named date, the new company steps into the old one’s shoes. The client agrees. The new company gets the rights and the duties. The old name is off the hook from that date. Everything else in the contract stays as it is.
Common mistakes
- Changing the company on the invoice and assuming the contract moved. That is not a novation.
- Assigning “the contract” in an email when you needed a three-party novation of the duties.
- Leaving the outgoing party on the liability cap and the indemnity after they were meant to be released.
- Novating only the master and forgetting each live statement of work.
Frequently asked questions
What is novation?
Replacing one contract with a new one so a new party steps in and an old party is released. It needs the consent of everyone involved.
How is novation different from assignment?
Assignment transfers rights and leaves the original party on the hook for the work. Novation moves rights and obligations and discharges the old contract. See /glossary/assignment.
Who has to sign a novation?
The outgoing party, the incoming party and the remaining party. Changing the name on an invoice is not consent.
Does a novation need a deed?
Not if there is consideration on all sides. Where one side gives up rights and takes nothing back, parties sometimes use a deed. See /glossary/deed.
Related
The legal wording governsLast reviewed 28 October 2026Pending lawyer review