Just kidding, they are not the same at all – just like One Direction isn’t the same after Zayn left. But we digress. One of these two gems lets you transfer rights (but hang on to obligations) and the other lets you walk away from the relationship without rights or obligations. Confused? Read on.
What’s the deal with assignments?
If you want to keep performing your obligations under the agreement but give some of your rights to a third party, you’re talking about an assignment.
Say you want to allow your parent company to collect payments from one of your customers while you continue performing services for that customer. You’d use an assignment deed to assign these rights to your parent company.
So how is a novation different?
If you want to assign your rights and obligations under an agreement to a third party, you need to novate it.
It’s not the only time you’ll see them but novation deeds often appear after major corporate transactions like acquisitions or group company restructures. When one company takes over another, novation deeds are used to transfer contracts from the seller to the buyer from the date of the sale.
Do I need consent from anyone?
It depends on what you’re doing. Novations always require consent from all parties but that’s not true for assignments. The best bet is to take a look at the contract you’re dealing with and see what it says on consent.
What else do I need to know?
Whether you’re after an assignment or a novation, you should set out the arrangements in writing. Document what has been agreed between the parties, get it signed and put it away safely.