Partial Novation Agreement Template for England and Wales

A Partial Novation Agreement allows you to transfer selected rights and obligations from an existing contract to a new party while keeping other terms with the original contracting party. Unlike a full novation that replaces the entire contract, this document gives you the flexibility to restructure only specific aspects of your contractual arrangements under England and Wales law.

What is partial novation?

Partial novation is the transfer of part of a contract's rights and obligations to a new party, with the balance staying under the original agreement. The original contract is not fully discharged. Instead, a new contractual relationship is created for the transferred elements while the remaining provisions continue between the original parties. This is different from assignment, where only benefits (rights) move and the original party stays liable for the obligations. In a novation, both the benefit and the burden pass, so the new party steps in for the specific responsibilities being transferred.

Partial novation vs full novation vs assignment

These three routes for moving contractual rights and duties are often confused. The table below sets out how they differ.

When do you need this document?

You will need a Partial Novation Agreement when your business undergoes restructuring but you want to maintain some existing contractual relationships. This commonly occurs during mergers and acquisitions where only certain business divisions are being transferred, or when you are selling specific assets that carry associated contractual obligations. The document is also essential when you need to bring in a new party to share responsibilities for particular aspects of a contract, such as when a subsidiary takes over certain obligations from its parent company. Corporate groups frequently use partial novations when reorganising their structure to ensure specific entities handle appropriate contractual duties while maintaining overall business continuity. It also comes up in international group restructures, where an entity in one jurisdiction hands specific obligations to a related entity abroad. If you instead need to move an entire agreement, a service agreement or a standalone assignment may be the better starting point.

What should a partial novation agreement contain?

A workable agreement covers a defined set of provisions. The core content includes:

• The precise rights and obligations being transferred, and those expressly retained by the original party.
• Named parties: the original party, the continuing counterparty, and the incoming party taking on the transferred elements.
• The effective date of the partial novation and any conditions that must be met first.
• Whether the incoming party assumes liability for past breaches or only obligations arising after the effective date.
• The treatment of guarantees, securities, and third-party rights linked to the original contract.
• Consideration from each party, or execution as a deed where consideration is absent.
• A consent clause confirming that every original party agrees to the transfer, without which the novation is not effective.
• Governing law, jurisdiction, and how any disagreement between the parties is managed.

Key legal considerations

The most critical aspect is clearly defining which rights and obligations are being transferred and which remain with the original party. Your agreement must specify the exact scope of the novation to avoid disputes about what has been transferred. You need to ensure that all parties provide valid consideration for the novation, as required by English contract law. The document should address whether the new party assumes liability for past breaches or only future obligations. You must also consider how the novation affects any guarantees, securities, or third-party rights associated with the original contract, including any bank guarantee or security taken over the original agreement, which may need to be re-issued or released. Getting the scope precise is a practical risk control: an ambiguous transfer leaves it unclear who owes what, and who can bring a claim if something goes wrong. The agreement should establish clear communication channels between all parties going forward.

Legal requirements in England and Wales

Under English law, a partial novation requires the express consent of all parties to the original contract, as established by common law principles of privity of contract. The Companies Act 2006 governs the authority of corporate signatories, so you must ensure that company representatives have proper authority to enter into the novation. The agreement must comply with the Law of Property Act 1925 if it involves the transfer of any property-related rights. You should consider the implications of the Contracts (Rights of Third Parties) Act 1999, particularly if you want to exclude third-party enforcement rights. The document must be executed as a deed if it lacks consideration from all parties, following the requirements of the Law of Property (Miscellaneous Provisions) Act 1989. Proper execution typically requires signatures from authorised representatives of all parties, with corporate entities needing to follow their constitutional requirements for contract execution.

A worked example

A software company holds a single managed services contract covering both hosting and support. It sells its support division to a new provider but keeps the hosting side in-house. A partial novation transfers the support obligations and the right to be paid for support to the new provider, while hosting stays under the original contract. The customer consents, the effective date is fixed, and the agreement records that the new provider is responsible only for support work carried out after that date. Where personal data moves with the support function, the parties address data protection separately as part of the same restructure.

Common questions

Does a novation need a court to approve it? No. A partial novation takes effect through the consent of the parties recorded in the agreement, not through any court process. Clear drafting is what keeps the transfer enforceable and reduces the chance of a later claim.

Can I reuse the same document for different deals? Yes. Set the retained and transferred obligations for each deal, then apply the same structure across your contract management going forward so each transfer is documented consistently.