Novation

Novation Definition

Novation is the replacement of a valid contract with a new one, often involving a change in the contracting parties. It is a common practice in business sales and company takeovers. 

Novation Process

Novation involves transferring a contract's rights and responsibilities to another party. It requires agreement from all parties and is often used to avoid the complications of contract cancellation. 

It is common in the construction industry, enabling subcontractors to delegate jobs to others with client approval. Novation also facilitates business sales or takeovers by allowing the new owner to retain existing contracts.