Novation Agreement Template for Indonesia

A Novation Agreement transfers all rights, obligations, and responsibilities from one party to another in a contract, essentially replacing the original party with a new one. Under Indonesian law, this three-way agreement requires consent from all parties involved: the original party (who's stepping out), the new party (who's stepping in), and the remaining party from the initial contract.

Common in Indonesian business transactions, novations help companies handle mergers, acquisitions, and debt restructuring smoothly. They're particularly useful when companies need to transfer complex contractual obligations while maintaining legal certainty under Indonesia's Civil Code (KUHPerdata). Unlike an assignment which only transfers rights, a novation creates an entirely new contract that replaces the original one.

Use a Novation Agreement when your company needs to transfer its entire position in a contract to another party. This commonly happens during corporate restructuring, when selling part of your business, or if you're acquiring another company's contractual relationships in Indonesia. For example, if you're merging two subsidiaries, you'll need novations to smoothly transfer all vendor contracts to the surviving entity.

The agreement becomes essential in long-term commercial contracts, particularly those involving regular payments, ongoing services, or complex supply chains. Indonesian banks often require novations when refinancing loans or when borrowers undergo ownership changes. It's also crucial for construction projects when contractors need to be replaced while keeping the original contract terms intact.

• Simple Novation: Used for straightforward contract transfers in Indonesian business deals - typically for basic service agreements or equipment leases
• Debt Novation: Specifically structured for transferring loan obligations between parties, common in Indonesian banking and finance
• Project Novation: Tailored for construction and development projects, transferring complex multi-party obligations while preserving warranties and indemnities
• Corporate Restructuring Novation: Designed for mergers and acquisitions, handling multiple contract transfers simultaneously
• Conditional Novation: Includes specific triggers or conditions that must be met before the novation takes effect, often used in staged business transitions

• Legal Counsel: Draft and review Novation Agreements to ensure compliance with Indonesian law and protect their clients' interests
• Corporate Directors: Authorize and execute the agreements during mergers, acquisitions, or business restructuring
• Banks and Financial Institutions: Facilitate novations for loan transfers, debt restructuring, and refinancing arrangements
• Construction Companies: Use novations when transferring project responsibilities or replacing contractors
• Business Owners: Initiate novations when selling parts of their business or transferring contractual obligations
• Notaries: Authenticate and witness novation agreements as required under Indonesian Civil Code

• Original Contract Review: Gather all existing contract documents, including amendments and related agreements
• Party Details: Collect complete legal names, addresses, and registration numbers of all three parties involved
• Scope Definition: Clearly identify which rights and obligations will transfer to the new party
• Consent Verification: Obtain written confirmation from all parties agreeing to the novation
• Effective Date: Determine when the transfer of obligations will take place
• Additional Terms: List any specific conditions or requirements unique to your situation
• Document Generation: Use our platform to create a legally-sound Novation Agreement that meets Indonesian legal requirements

• Identification Section: Full legal names, addresses, and registration numbers of all three parties involved
• Recitals: Background of original contract and reasons for novation under Indonesian Civil Code
• Transfer Clause: Clear statement of rights and obligations being transferred from outgoing to incoming party
• Consent Declaration: Express agreement from all parties to the novation arrangement
• Effective Date: Specific timing for the transfer of obligations
• Governing Law: Clear statement that Indonesian law governs the agreement
• Release Provisions: Discharge of original party's obligations
• Execution Block: Signature sections with company stamps as required by Indonesian practice

A Novation Agreement differs significantly from an Assignment Agreement, though both involve transferring contractual rights. Under Indonesian law, these documents serve distinct purposes and have different legal effects.

• Transfer Scope: Novation transfers both rights AND obligations to a new party, completely replacing the original party. Assignment only transfers rights while the original party remains responsible for obligations
• Consent Requirements: Novation requires explicit consent from all three parties. Assignment often needs only the assignor and assignee's agreement, unless the original contract states otherwise
• Legal Effect: Novation creates an entirely new contract, extinguishing the old one. Assignment keeps the original contract intact, just changing who receives the benefits
• Risk Profile: Novation offers cleaner breaks but requires more negotiation. Assignment is simpler but leaves the original party exposed to ongoing liability