Service contract novation agreement

About this document

Use this agreement to transfer one party’s rights and obligations under a service contract to another party.

This is a simple yet comprehensive agreement that can be used to novate any service contract with only minimal editing. It ensures continuity when the party receiving the service changes.

For the purposes of providing a working example, this document has been edited to allow the transfer of a website hosting service agreement between the customers of an Internet service provider (ISP).

The consent of all three parties - the transferee, the transferor and the other contracting party - is required to effect the novation. Unless you specifically require the consent of the other contracting party, our assignment agreement may be a simpler way of achieving a transfer.

Why not a deed of novation?

We have a longer article about deeds as a type of legal document that explains why a deed of novation is unlikely to be required in practice.

To summarise, the deed format is used where one party to a contract receives no consideration. However, a novation is invariably "for value", and as such, using a deed is not appropriate.

In the unlikely event that a party agrees to novation out of pure kindness, the consideration can be entered as “one pound”, or a "peppercorn". The sum does not need to have any relation to the value of the debt being novated.

When to use this agreement

There are, of course, many uses for this agreement. Examples include:

• on the purchase of a business that depends on the continuation of certain services (e.g. website hosting)

• on the sale of an asset in the process of being produced or amended

You might be:

• the service provider, looking to make sure that the buyer of the business remains a customer

• the buyer of the business, keen to sort out the smooth transfer of day to day operations

• the seller of the business, who wishes to make a sale as easy and therefore as attractive to a prospective buyer as possible

Features and contents

• Suitable when either party is resident outside the UK
• Ensures a legal transfer as it is drawn as an agreement between all parties
• Comprehensive provisions provide ideas for you to mould

The agreement contains the following sections:

• Details of the parties
• Indemintity clause to protect both parties from loss, damage or legal liability once the contract is transferred
• The novation
• Existing claims: sets out how outstanding claims against the transferor will be dealt with
• Other usual legal provisions in plain English