Novation, Variation and Rescission - A Question of Intention?

Corporate Rescue and Insolvency, Vol. 1, No. 95, 2008

6 Pages Posted: 7 Jul 2008  

Look Chan Ho

Freshfields Bruckhaus Deringer LLP

Date Written: July 6, 2008

Abstract

Restructuring often requires refinancing which in turn requires amendments to existing agreements, such as amending the definition of 'secured liabilities' in a debenture and extending a loan facility's maturity date. The legal effect of these amendments gives rise to a common question: whether the amendments are a mere variation of the existing agreements or a rescission of the existing agreements and entry into new ones. The answer to this question could determine a host of issues, such as the statutory requirements to register charges, the discharge of guarantees and tax reliefs. Recent case-law has correctly shown that while the variation/rescission distinction depends on the intention of the parties, intention is not the sole determining factor. The answer to the variation/rescission question has to be context-sensitive.

Keywords: Novation, variation of contract, contractual amendment, rescission

JEL Classification: K10, K12, K19, K20, K29, K30

Suggested Citation

Ho, Look Chan, Novation, Variation and Rescission - A Question of Intention? (July 6, 2008). Corporate Rescue and Insolvency, Vol. 1, No. 95, 2008. Available at SSRN: https://ssrn.com/abstract=1156084

Look Chan Ho (Contact Author)

Freshfields Bruckhaus Deringer LLP ( email )

65 Fleet Street
London EC4Y 1HS
United Kingdom
+44 20 7936 4000 (Phone)
+44 20 7108 2089 (Fax)

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