If someone needs to transfer part of a contract that they have an interest in to someone else, they will need to use either assignment or novation. There is only a small difference between the two, but it’s important to understand this before proceeding.

Point of Difference

Novation is when one party transfers its rights and obligations to a third party after gaining consent from the original counter-party. It is essentially a new contract and can include new terms.

Assignment occurs when someone wants to transfer the ownership of something (rights or property) and its benefits to another.

When changing a contract, if you assign when you should novate, you could be liable if the other party cannot fulfil their obligations. A novation transfers not only the benefit but also the burden of the contract to another party, creating a whole new contractual relationship. By contrast, an assignment only transfers the benefit of a contract.

Another difference is that novation requires all parties to give their consent, while assignment doesn’t always require you to obtain consent, depending on the terms of the contract. Either way, what should be considered is whether there is a need to novate, if the novatee agrees to accept the burden and if all parties agree and consent.

Checks and Balances

While a contract may be called a deed of assignment, it may still have the same effect as novation. All parties need to be sure they are clear on what they are signing and agreeing to. The Law Society stresses the importance of using clear language when drafting a contract so that each party has a good understanding of it.

As it is so important to get it right, finding a solicitor who can negotiate on your behalf is essential. Experienced solicitors, such as those found at https://www.parachutelaw.co.uk/deed-of-assignment, can advise on the best course.

When it comes to property, a deed of assignment is usual as it allows for the transfer of the beneficial interest, normally between a husband and wife, for tax efficiency.