14 Distinction between a novation and an assignment

the assignee in an assignment does not become a party to the initial contract between the debtor and the assignor. This is comparable to a novation in so far that the parties of the novation do not become parties to the initial contract because a new contract is created whereas in an assignment the underlying […]

08, 15, 2015
Comments Off on 13 Consent to novation

By whiggs

Transfer of financial assets in transactions

13 Consent to novation

In a lending arrangement the borrower has to be a party to the novation process although it will usually be the case that the express terms of the loan agreement provide that the borrowers consent is not required for the novation to take effect. In the normal course, the documentation required to effect a novation […]

08, 15, 2015
Comments Off on 12 Be careful though!

By whiggs

Transfer of financial assets in transactions

12 Be careful though!

In the case of a lending arrangement where it could be the case that the loan may not be fully drawn, the new lender as substituted party could be assuming obligations to advance monies to the borrower where the novation has taken effect so, mechanically, if a lender wishes to exit or reduce its exposure […]

08, 15, 2015
Comments Off on 11 What is novation?

By whiggs

Transfer of financial assets in transactions

11 What is novation?

A novation is different to an assignment as in a novation there is no assignment of rights and obligations but rather the creation of new rights and obligations in a new agreement. In the formal sense, a third party will become a ‘substituted contracting party’ by a novation of the original agreement. Novation will ordinarily […]