What is a novation agreement?

A novation agreement is used where the original parties to the agreement have agreed that a new party should replace one of them and assume the obligations and liabilities of the replaced party. The assignment of a contract can only apply to the transfer of the rights under the contract. The burden of a contract (the performance obligations) cannot be assigned under English law If one party wants to transfer the burden of a contract, the contract will need to be novated. Under a novation, the contract is replaced with a new contact and the new party to the contract is treated as an original party to the contract in place of the departing party. Novation requires the consent of the other party to the contract (the remaining party) and is documented in a novation agreement or deed of novation between the three parties.

Novation Agreement Template

Novation agreement template for a new person to become party to and bound by an agreement in place of one of the original parties. The original party is released from its obligations under the agreement.

for the novation of a contract or agreement
for a new party to replace one of the original parties to the contract
where the other original party to the contract consents to the novation
for a contract governed by English law

What are the key features?

9 clauses over 3 pages
agreement in the form of a Deed of Novation
wording for replacement party to become party to the novated contract
alternative wording depending on whether the replaced party will be discharged from:
- all liability under the contract from its commencement
- liability under the contract from the date of novation
indemnity from the new party in favour of the replaced party for failure to perform the novated contract

What else do I need to know?

A novation agreement template is used where the original parties to the agreement have agreed that a new party should replace one of them and assume the obligations and liabilities of the replaced party.

Novation is an alternative to assignment – assignment of a contract can only apply to the benefit of a contract, which are the rights of a party under the contract. The burden of a contract (the party’s performance obligations) cannot be assigned under English law. If one party wants to transfer both the benefit and the burden of a contract, the contract will need to be novated.

Under a novation, the contract is effectively replaced with a new contact and the new party to the contract is treated as an original party to the contract in place of the departing party. Novation requires the consent of the remaining original party to the contract and is documented in a novation agreement or deed of novation between the three parties.

Under the novation agreement:

the original parties to the agreement agree that the new party takes the place of one of the original parties
the new party agrees to perform the obligations of the replaced party and the remaining party agrees to accept the new party’s undertaking to perform these obligations
the new party can either agree to be liable for all the obligations of the replaced party from the start of the agreement or only for its own performance obligations from the date of novation

What other documents are available?

For a template contract assignment, see

Contract Assignment.

Description

When do I use this document?

if a shareholder has lost its original share certificate or it has been destroyed
if applicable, alongside a transfer of the shares covered by the lost or destroyed original certificate

What are the key features?

different forms of indemnity, depending on whether the shareholder is also transferring shares
alternative forms of indemnity, depending on whether the shareholder is an individual or a company

What else do I need to know?

What is a share certificate?

A share certificate is a document evidencing ownership of shares in a company. By law, shareholders are entitled to receive this certificate when they acquire shares, either through allotment or transfer.

What happens if a share certificate is lost or destroyed?

If a shareholder loses or destroys their certificate, they can ask the company for a replacement. To safeguard itself, the company will usually require a lost share certificate indemnity. This is a legal undertaking under which the shareholder agrees to cover any losses the company might face by issuing the replacement.

What risks does the indemnity protect against?

The indemnity protects the company from risks such as:

Duplicate Claims: If the original certificate reappears, someone else might claim ownership, causing disputes or financial loss.
Fraudulent Claims: A person could falsely claim to have lost the certificate and misuse the replacement, for example, by attempting to sell the shares unlawfully.
Administrative Errors: Mistakes in issuing a replacement or registering a transfer without the original certificate could lead to legal administrative errors.
Legal Liability: If a replacement certificate or transfer is improperly handled, the company might be held responsible for resulting losses.

Explanatory Guides

As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.

£25.00 exc VAT

Updated by a lawyer on 31/07/2025

Updated By a lawyer on 01/05/2023

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Novation Agreement Template