Assignment and novation

Transferring a contract to someone else. Two different mechanisms.

What it means

Assignment transfers the benefit of a contract. Novation replaces one party with another, transferring both benefit and burden, and requires everyone's consent.

Why it matters

It matters on a sale of a business, on outsourcing, and when a customer is taken over. A contract with an anti-assignment clause may not transfer at all.

What it looks like in practice

On an asset sale, key contracts usually need novating, which gives every counterparty a chance to renegotiate or decline. That is a real transaction risk and it is why share sales are often preferred.

What to watch out for

Change of control clauses, which allow the other party to terminate if your ownership changes. Buyers look for them in due diligence.

Where to get proper advice

A commercial solicitor. For a clause you rely on regularly, one properly drafted set is cheaper than one dispute.