What is a Novation Agreement Review?
A novation agreement is a legal contract that replaces a previous agreement with a new one. It transfers the rights and obligations of the outgoing party in the first agreement to a new party. The original agreement is cancelled.
The three parties that are involved in a novation agreement are the:
- Outgoing party, or the person who is leaving the contractual agreement.
- Incoming party, or the new person entering the agreement and assuming all rights and duties.
- Remaining counterpart, or the original party that stays in the agreement.
To prevent ambiguity in this arrangement, a novation agreement’s terms must be clearly defined. Reviewing all its terms is essential to prevent challenges or disputes.
Read the rest of this article for tips on how to review a novation agreement, such as what key terms you should check, and how you can benefit from hiring a qualified lawyer for a legal review of your document.
What are Key Terms to Review in a Novation Agreement?
A novation agreement usually contains some key terms, such as the following:
- Recitals. Check the original contract’s information, such as its effective date and purpose. This provides clarity on what is being cancelled.
- Release clause. This must be included in the agreement to liberate the outgoing person who is leaving the contract from all previous and future liabilities.
- Effective date. Make sure that the date(s) when the old agreement is cancelled and the new agreement begins is/are clearly stated.
- Consent. All parties included in the agreement must agree to the transfer.
- Assumption of liability. This must be included to state that the new party will accept all duties and obligations from the old agreement.
What are Tips for Reviewing a Novation Agreement?
A novation agreement should specify important details that help both parties to understand their roles and expectations. Here are some tips to bear in mind when reviewing a novation agreement.
Check the Consideration
There’s usually something of value exchanged between parties that must be specified in the agreement. For example, it can include the original party being released from liability and the new party entering the agreement taking over the responsibility.
Verify the Survival Clause
There could be some terms that survive the novation to remain in effect and continue to be legally binding. This could include confidentiality or indemnification clauses. Check that the novation agreement is clear about them.
Consider Previous Financial Obligations
There might be some previous financial obligations, such as debts, that need to be settled prior to the novation agreement coming into effect. You can navigate this situation by including a statement about how previous liabilities will be handled.
Check the Agreement Execution
The agreement must be properly executed, such as by outlining the parties involved in the agreement, providing details about the original contract, and including the parties’ signatures to show that they all give consent to the agreement terms.
Conduct Due Diligence
Since the new party entering the agreement is responsible for liabilities from before the novation, they will want to consider adding indemnities to the novation agreement. Try to conduct due diligence before agreeing to the final agreement draft so that you have clarity about all liabilities for which you’ll be responsible.
Do You Need a Legal Review of Your Novation Agreement?
Since there can be complicated or technical elements in a novation agreement, it’s worth hiring a lawyer to legally review it. They’ll unpack any legal jargon or vague wording that can hide risks in the agreement.
A lawyer can help you during the review of a novation agreement by:
- Confirming what is being replaced in the agreement or terminated so that parties have clarity.
- Reviewing the rights and obligations of parties to clarify who is responsible for liabilities.
- Checking all releases so that it’s clear if the outgoing party is released from all future obligations and duties. This prevents confusion and disputes.
- Verifying all representations and warranties so that you’re not exposed to unfair liabilities.
- Considering the original agreement so that they can identify any provisions that have been changed or transferred.
- Negotiating terms with the other parties. If there are any terms you don’t agree with, a lawyer can negotiate them on your behalf for a more favorable working relationship.
- Executing the agreement properly. This includes ensuring that all terms are enforceable under the relevant laws.
- Flagging any one-sided or unclear provisions in the agreement, preventing you from taking on obligations that belong to another party.
Where to Find a Lawyer for a Novation Agreement Review
Finding a lawyer to review your novation agreement isn’t something that should make you feel stressed. Instead of asking people you know for lawyer recommendations, using an online legal platform makes it easier to connect with a reputable and experienced lawyer in your area.
ContractsCounsel is one of the biggest online legal marketplaces that connects you to a curated network of vetted lawyers. If you need to ask a lawyer to review your novation agreement, the process is easy.
Here are the steps to follow:
- Start by going to the ContractsCounsel marketplace.
- Post your project or request, which is free to do on the platform.
- You can mention a bit of information about the request, such as why you’re seeking a legal review of the contract. This will help you to match with the most suitable lawyers.
- Wait for lawyer bids. You’ll receive lawyer bids from lawyers on the platform who are ready to assist you.
- Review the lawyers’ information. Before selecting a lawyer to hire, check the lawyers’ information, which is conveniently provided by the platform. This includes their location, level of expertise, years of experience, and client ratings for previous projects on the platform.
- Choose a lawyer to work with and hire them to review your novation agreement for a flat fee.
