Assignment and Novation

Assignment and Novation. A party can exit a contract without ending the contract itself. An assignment occurs when a person transfers their rights and duties under a contract to another party. Most contracts are assignable unless the contract specifically prohibits assignment.The person transferring their contractual rights is called the assignor, while the person receiving those rights is the assignee.Even after an assignment, the assignor generally remains responsible for ensuring the contract terms are fulfilled, unless the other original party formally releases them from liability. In contrast, the parties may agree to replace one party’s obligation with another’s. This is done through a novation agreement, which substitutes a new party for the original one. A novation releases the original party from further responsibility under the contract.