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Novation: Difference between revisions
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{{g}}An layperson’s terms a [[novation]] is the transfer in full of one party's rights and obligations under a contract to another person. The other party to the contract stays put. | {{g}}An layperson’s terms a [[novation]] is the transfer in full of one party's rights and obligations under a contract to another person. The other party to the contract stays put. | ||
Unlike an [[assignment]], a [[novation]] requires the agreement of all three parties (the exiting party, the incoming party and the party staying put). A party to an [[English law]] {{t|contract}} may “[[assign]]” its ''[[right]]s'' to a third person without its counterparty’s permission (as long as the contract does not forbid it); however, it cannot unilaterally assign its'''[[obligation|obligations]]''' under English law. | Unlike an [[assignment]], a [[novation]] requires the agreement of all three parties (the exiting party, the incoming party and the party staying put). A party to an [[English law]] {{t|contract}} may “[[assign]]” its ''[[right]]s'' to a third person without its counterparty’s permission (as long as the contract does not forbid it); however, it cannot unilaterally assign its '''[[obligation|obligations]]''' under [[English law]]. | ||
There are pretty obvious economic reasons why that should be so: the creditworthiness of the party with whom you have contracted is a fundamental part of the bargain you have made: that party should not be able to substitute itself without your permission. | There are pretty obvious economic reasons why that should be so: the creditworthiness of the party with whom you have contracted is a fundamental part of the bargain you have made: that party should not be able to substitute itself without your permission. | ||