Assignment and novation clauses

Assignment and novation clauses are critical components in contract law, delineating how parties may transfer rights and obligations. This guidance note explores the nuanced distinctions and legal frameworks surrounding these clauses, essential for practitioners managing contractual transfers.

Topics Covered

• Transferring contractual rights vs obligations
• Assignment
• Novation
• Key drafting considerations
• Change in control considerations

Essential Insights

• Understand why assignment typically transfers contract benefits, while novation transfers obligations and liabilities.
• Assess how assignment clauses may prohibit or restrict transfers, often requiring consent, with important legislative overlays.
• Explore the complex legal requirements for valid novation, including the necessity of tripartite agreements and prospective consent nuances.
• Consider critical drafting strategies that address asymmetrical assignments, conditions on consent, and confidentiality implications.
• Evaluate the interplay between change in control provisions and assignment clauses to prevent circumvention of restrictions.
• Recognise potential tax and stamp duty consequences arising from assignments and novations that can impact deal structuring.