When it comes to legal contracts, two terms frequently heard are novation agreement and addendum. While they may sound similar, these two legal terms have different meanings and purposes. In this article, we will discuss the differences between novation agreements and addendums.

What is a Novation Agreement?

A novation agreement is a legal document that replaces one party with another in a contractual obligation. In simpler terms, it means substituting one party to the contract with another. This is typically done when new parties take over the obligations and rights of the original contracting parties.

A novation agreement is used to transfer the rights and obligations of an ongoing contract to a new party. It essentially extinguishes the original contract and creates a new one. For example, if Company A hired Contractor B to provide services for a project, and Company A wants Contractor C to take over the project, then a novation agreement would be used to transfer the contract from Contractor B to Contractor C. In this case, Contractor B would be released from any future obligations under the contract, and Contractor C would become the new party responsible for carrying out the terms of the contract.

What is an Addendum?

An addendum is a document that is added to an existing contract to modify, clarify, or add additional terms to it. It is a supplemental document that does not replace the original agreement but rather modifies it. An addendum is typically used when both parties agree to modify the original contract, but do not want to create a new document.

An addendum is used to add new terms to a contract or modify existing ones. For example, if Company A and Contractor B had entered into a contract, but due to unforeseen circumstances, the scope of the project needed to be modified, an addendum could be added to the original contract to outline the new terms.

Differences Between Novation Agreement and Addendum

The main difference between a novation agreement and an addendum is that a novation agreement replaces the original contract with a new one, while an addendum supplements and modifies the terms of the original contract. A novation agreement transfers the rights and obligations of one party to another, while an addendum adds or modifies the terms of the existing contract.

In terms of legal implications, a novation agreement is generally considered more complex and legally binding than an addendum. This is because a novation agreement essentially creates a new contract, while an addendum simply modifies an existing one.


In summary, a novation agreement is used to transfer contractual obligations and rights from one party to another, while an addendum is used to modify or supplement the terms of an existing contract. Understanding the differences between these two legal terms can help ensure that your contracts are properly executed and legally binding. If you have questions about novation agreements or addendums, consult with a legal professional to ensure that your contracts are properly drafted and executed.