Novation

Novation matters most where a seller wants to be truly free of a contract going forward — a lease, a franchise agreement, a major supplier deal — rather than merely handing it off while remaining on the hook if the buyer later defaults. A landlord or franchisor’s consent to a novation typically confirms the seller is released, which a simple handover does not.

How it differs from an assignment

An assignment transfers rights and duties to a new party, but unless the other side expressly agrees to release the original party, that original party can remain liable if the new party fails to perform. Novation replaces the contract entirely with a new one involving the new party, and the original party’s obligations end.

The mistake people actually make

Using "assign" and "novate" as if they mean the same thing in a deal document. A seller who thinks their obligations under a key contract ended at closing, because the contract was "assigned" to the buyer, can discover years later that they are still exposed — because what actually happened was an assignment without a release, not a novation.

The Quebec difference

Quebec’s Civil Code codifies novation explicitly, including the rule that it is never presumed and must be clearly expressed by the parties, while common law provinces treat novation as a judge-made contract doctrine built up through case law rather than a single governing statutory provision.