Novation
Written by Christopher Krassnig - Founder - Kairos Exchange and ZenoX Media.
Published
- Checks in every memo8
- Automatic on day one3 of 8
- Read by handad spend and processor payouts
- Tracked ecom salesEUR 200M+ZenoX ad-management figures, not Kairos deal volume - Kairos hasn't closed a deal yet.
Novation is the three-way agreement that swaps one party out of a contract for another, with the remaining party's consent, so the new party owes what the old one did. A supplier or platform contract does not automatically follow a store's assets into a sale. Skip novation and the buyer either signs a fresh agreement with that counterparty or loses the relationship right when they need it.
Why It Kills Ecom Deals
A supplier, a payment processor, or an ad platform account is a contract, not an asset in the ordinary sense, and its own terms often say plainly that it cannot move to a new owner without consent. A buyer who assumes the store's supplier pricing and terms transfer automatically finds out otherwise the week after closing, when the supplier either refuses to deal with the new entity or resets pricing from scratch. This is why a diligence checklist has to name every contract by name and confirm, in writing and before signing, whether the counterparty will novate it, and what happens to the deal's economics if they will not.
Not to Be Confused With
- Assignment
- assignment transfers a contract's benefits without the other party's consent and can leave the seller still liable if the buyer fails to perform; novation ends the seller's obligation entirely, but only because the other party agreed to release them. Confuse them and a seller can think they are fully off the hook on a supplier contract when they legally are not.