novation-agreement

name	novation-agreement
title	Novation Agreement
description	Drafts tripartite U.S. novation agreements substituting an incoming party for the original obligor with full release. Use when drafting novation agreements, party substitution agreements, or contract assumption documents requiring complete obligor discharge. Covers government contracts (FAR 42.12), M&A substitutions, and commercial restructurings.
author	CaseMark
author_url	https://github.com/CaseMark/skills/tree/main/skills/legal/novation-agreement
license	Apache-2.0
version	0.1.0
execution_mode	open
jurisdiction	us
practice	contracts
language	en
tags	["agreement","drafting","regulatory","transactional"]

Novation Agreement

Tripartite agreement substituting an Incoming Obligor for the Original Obligor with Continuing Obligee consent. Achieves full release—no residual liability for the exiting party.

Prerequisites

Gather before drafting:

1. Original contract — executed copy with all amendments and contract numbers
2. Business rationale — APA, merger docs, board resolutions, or restructuring records
3. Authority docs — org documents, good standing certificates, authorization resolutions (all three parties)
4. Security instruments — guarantees, LCs, performance bonds tied to original contract
5. Incoming Obligor diligence — financials, licenses, permits, operational capability evidence
6. Disclosed defaults — identify all pre-existing breaches before drafting

Party Roles

Party	Role
Original Obligor	Exiting party; receives full release on effective date
Continuing Obligee	Remaining party; consents to substitution and releases Original Obligor
Incoming Obligor	Substituted party; assumes all future rights and obligations

Drafting Workflow

1. Recitals

• Identify original contract: title, date, number, subject matter, key terms, amendments
• State business rationale (M&A, restructuring, regulatory)
• Declare intent as true novation — not assignment or delegation
• Recite consideration among all three parties

2. Operative Novation Clause

Present-tense operative language must include:

• Incoming Obligor hereby substituted for Original Obligor in all respects
• Incoming Obligor assumes all obligations, liabilities, and covenants (pre- and post-effective date)
• Incoming Obligor succeeds to all rights, benefits, and remedies
• No continuing liability (primary or secondary) for Original Obligor post-effective date

3. Release Provision