Legal Due Diligence · glossary
Replacing a contract with a new three-way contract, so that obligations, not just rights, pass to a new party. It needs the other party's consent, which is why it matters mostly on an asset deal. Chapter 7
Explained in Chapter 7, Material Contracts, of Legal Due Diligence.
The main page for this term is Novation, in Finance Deals & Syndicated Lending.
Sunrise was a share deal, but the other structure changes the contract work. On an asset deal the buyer buys the business out of the company, piece by piece, including each contract. The benefit of a contract can usually be assigned, subject to any restriction. The obligations pass only by novation (a new three-way contract), which needs the other party's consent.Read Chapter 7, Material Contracts →
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