Novation agreement: transfer of service contract
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About this novation agreement
Use this document to transfer one party’s rights and obligations under a service contract to another party.
This is a simple yet comprehensive agreement that can be used to novate any service contract with only minimal editing. It ensures continuity of service when the party receiving the service changes. For the purposes of providing a working example, this document has been edited to allow the transfer of a website hosting service agreement between the customers of an Internet service provider (ISP).
The consent of all three parties - the transferee, the transferor and the other contracting party - is required to effect the novation. Unless you specifically require the consent of the other contracting party (perhaps because your contract has a non-assignment clause), our assignment agreement may be an even simpler way of transferring your contract to someone else.
Why not a deed of novation?
The deed format is used where one party to a contract receives no consideration. However, a novation is invariably "for value", and as such, a deed of novation confers little additional advantage.
In the unlikely event that a party agrees to novation out of pure kindness, the consideration can be entered as “one pound”, or a "peppercorn". The sum does not need to have any relation to the value of the debt being novated.
When to use this novation agreement
This document can be used to transfer any service contract to another party.
There are, of course, many uses for this agreement. Examples of when this document might be used include:
- On the sale/purchase of a business that depends on the continuation of certain services (e.g. website hosting);
- On the sale of an asset in the process of being produced or amended.
The buyer of this document might be:
- The service provider, looking to make sure that the buyer of the business keeps his business with the service provider;
- The buyer of the business, keen to sort out the smooth transfer of day to day operations;
- The seller of the business, who wishes to make a sale as easy and therefore as attractive to a prospective buyer as possible.
You should use this novation agreement, rather than an assignment agreement if all parties to the contract will agree to the change and sign the contract. Its usually easier just to get the transferring parties to sign an assignment agreement, but some contracts have non-assignment clauses that mean that novation is the only valid way of transferring the contract to someone else. If in doubt, use this agreement and obtain consent from all involved.
Agreement features and contents
- Suitable for transferring service contracts
- Suitable when either party is resident outside the New Zealand
- Ensures a legal transfer as it is drawn as an agreement between all parties
- Comprehensive provisions provide ideas for you to mould
The novation agreement contains the following sections:
- Details of the parties;
- Indemintity clause to protect both parties from loss, damage or legal liability once the contract is transferred;
- The novation;
- Existing claims: sets out how outstanding claims against the transferor will be dealt with;
- Other usual legal provisions in plain English.
This document was written by a solicitor for Net Lawman. It complies with current New Zealand law.
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