BIMCO has published three standard novation agreements that provide a legal framework to change one of the original parties to a contract.
Corporate changes such as restructuring, sale of a company or sale of part of a company’s interests may make it necessary to replace an original contracting party. This is achieved by substituting, or “novating” the contract.
Two of the agreements cover time charter parties, one provides for a change of charterer and the other a change of owner, while the third agreement deals with a change of buyer under a shipbuilding contract.
“Until now there has been no standard form of contract for this purpose and parties have had to draft their own provisions,” BIMCO said.
BIMCO’s new agreements cover many of the legal and practical issues likely to be encountered when novating a contract.
The novation agreements were drafted by a team of legal and commercial experts headed by Francis Sarre of CMB NV and included Chris Kidd of Ince & Co, and Naoko Kaijo of Thomas Miller.
“Having ready-made standard novation agreements available will help make the process of novating contracts a lot simpler and smoother and ensure that the basic legal infrastructure is in place,” Francis Sarre, CMB, said.