Novation agreement: transfer of service contract

About this deed of novation

Use our novation agreement 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 deed of novation 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 implement the novation. Unless you specifically require the consent of the other contracting party (e.g. because your contract has a non-assignment clause), our deed of assignment may be an even simpler way of transferring your contract to someone else.

Why a deed of novation rather than a contract

Our novation agreement has been drawn as a deed rather than a contract. At law, a contract requires consideration (something in return for the novation). A deed does not require consideration, so it is a more flexible way of achieving the same end.

When to use this deed of novation

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 deed of novation (rather than a deed of assignment) if all parties to the contract will agree to the change and sign the deed. It’s usually easier just to get the transferring parties to sign a deed of assignment, 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. To make this easier for you, we have included a letter template that you can adapt easily and send to customers (frequently the other party to the contract being novated).

Agreement features and contents

• Suitable for transferring service contracts
• Suitable when either party is resident outside Canada
• Ensures a legal transfer as it is drawn as an agreement between all parties
• Comprehensive provisions provide ideas for you to mould
• Suitable for all provinces of Canada

The deed of novation contains the following sections:

• Details of the parties
• Indemnity 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