Get a novation deed that properly records the handover

That usually depends on whether the new party needs to take on obligations as well as rights under the existing contract. A novation deed is commonly used where one party is being replaced altogether, such as after a business sale, internal restructure or supplier change. By contrast, an assignment often only transfers benefits and may leave the original party still responsible for performance. If the commercial goal is a full substitution of parties for future obligations, novation is often the more appropriate document.

The main risk is that the document may not clearly deal with who remains responsible for past liabilities, when the new party takes over, or whether the continuing party has properly consented. A short form deed can also miss practical points like unpaid amounts, service credits, intellectual property permissions or linked schedules in the original contract. If those issues are left unclear, the parties can end up arguing about what was actually transferred and what stayed behind with the outgoing party.

A novation deed usually identifies the original contract, the outgoing party, the incoming party and the continuing party, then sets out when the transfer takes effect and how future rights and obligations are treated. Depending on the arrangement, it may also deal with accrued liabilities, payment obligations, confidentiality, intellectual property rights, service levels, releases and any continuing promise or indemnities. The drafting should reflect the underlying contract and the commercial deal, not just the fact that one party is changing.

Sometimes a template can help you understand the structure, but it may not be enough where the original contract has detailed payment terms, liability caps, IP clauses, service obligations or consent requirements. Templates also tend to assume a straightforward transfer, when many transactions involve carve-outs, side arrangements or unresolved obligations. A deed that is too generic can create uncertainty about what happens before and after the effective date. Tailored drafting is usually more useful when the transfer affects an active commercial relationship rather than a simple administrative change.

Usually we will need the original contract, details of the outgoing and incoming parties, the reason for the transfer, the intended effective date and any commercial points the parties have already agreed. It is also helpful to know whether there are unpaid invoices, ongoing service obligations, subcontracting arrangements or intellectual property licences tied to the original contract. Those details can materially affect the wording. If there are side letters or amendments to the original agreement, they should also be provided for review.

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