How to Review a Deed of Novation: A Clause-by-Clause Checklist

How do you review a deed of novation? Review a deed of novation by reading it clause by clause and asking one question of every clause: after this deed, who is on the hook for what, and from when? A novation moves a whole contract from one party to another and releases the party leaving, so the clauses that matter most are the release, the treatment of accrued liabilities, and whether all three parties have actually signed. This checklist walks through the deed in the order the clauses usually appear, with the red flags to catch. It is written for all three sides: the outgoing party leaving, the incoming party taking over, and the continuing party who stays in the contract. This is general information, not legal advice. Execution formalities for a deed differ by jurisdiction, so have a lawyer confirm them for a valuable contract. ## 1. Parties - Are all three parties named with full legal names and, for companies, registration details?

• Are all three actually signing? A novation by only two parties does not release anyone. Red flag: the continuing party has not signed. Without their consent there is no valid novation, only an attempted assignment that may leave the outgoing party still liable. ## 2. The original contract - Is the original contract identified precisely by title and date?
• Is it in force, and is any variation or side letter also captured? Red flag: a vague reference to "the agreement" with no date, so it is unclear exactly what is being transferred. ## 3. The novation and effective date - Is there a clear novation date from which the incoming party takes over?
• Does the incoming party take both the rights and the obligations, not just the benefit? Red flag (incoming party): you are assuming obligations from a date earlier than you expected, picking up problems that arose before you were involved. ## 4. Release of the outgoing party - Is the outgoing party released from obligations arising on or after the novation date?
• Is the release clear and unconditional, not left implied? Red flag (outgoing party): no express release, so you have handed over the benefit but may still be chased for performance. This is the single most important clause for the party leaving. ## 5. Accrued rights and liabilities - Who carries obligations that accrued before the novation date: unpaid sums, existing breaches, warranty claims?
• Does the split match what was commercially agreed? Red flag: the deed is silent on accrued liabilities, or it quietly dumps pre-novation problems on the incoming party, or leaves them with the outgoing party against expectation. This allocates real money, so it must be explicit. ## 6. Continuing party's position - Is the continuing party clearly obliged to perform in favour of the incoming party?
• Has the continuing party kept any security, guarantee or set-off right it needs? Red flag (continuing party): you are releasing a creditworthy outgoing party and accepting an incoming party you have not checked. Confirm the incoming party can actually perform before you consent. ## 7. Representations - Does each party confirm it has power to enter the deed and that the contract is live and not in breach? Red flag: a representation that the contract is free of breaches when you know of an open issue. Do not sign a statement you know is wrong. ## 8. Terms otherwise unchanged - Does the deed confirm the original contract continues unchanged except for the substitution?
• If terms are also being varied, is that done expressly? Red flag: an attempt to slip in changes to price, scope or term under the guise of a simple novation. Read the whole deed, not just the novation clause. ## 9. Execution, stamping and governing law - Is it executed as a deed with the witnessing or attestation the jurisdiction requires?
• Is stamp duty addressed, and is the governing law and forum sensible? Red flag: signed as a simple agreement where a deed is required, or stamp duty ignored. A defect here can make the novation unenforceable. ## Common mistakes in novation deeds A few mistakes come up again and again. The first is treating a novation as an assignment: a document that transfers the benefit but never releases the outgoing party, and never gets the continuing party's signature, has not novated anything. The second is silence on accrued liabilities, which leaves the parties to argue later about an unpaid invoice or an open breach that existed on the novation date. The third is forgetting linked documents: a novation of the main contract that ignores a related guarantee, security, or side letter can leave those hanging against the wrong party, so check whether anything else needs to move with the contract. A fourth, easy to miss, is timing. The novation date in the deed may not match the date the incoming party actually started performing, and that gap creates uncertainty about who owned the risk in between. Make the novation date, the effective date of performance and the signing date work together, and if the incoming party has already been performing, say so and deal with that period expressly rather than leaving it to inference. ## A fast triage If you only have ten minutes, read three clauses: the release of the outgoing party (clause 4), the accrued-liabilities split (clause 5), and the signatures (do all three parties sign, clause 1 and execution). Those decide whether the outgoing party is truly free, who pays for past problems, and whether the deed works at all. ## Where a contract workspace helps This checklist lets you review one deed of novation properly. The harder part is doing it across every contract that moves when a business or entity changes hands, confirming each deed releases the right party and allocates accrued liabilities correctly, and keeping each novated deed linked to the original it replaces. Drafting, reviewing, tracking and governing novations can live in one AI workspace tuned to how your company restructures, instead of being scattered across separate files. Adira is built around keeping those linked deeds together.