Novation, Variation and Rescission - A Question of Intention?
Corporate Rescue and Insolvency, Vol. 1, No. 95, 2008
6 Pages Posted: 7 Jul 2008
Date Written: July 6, 2008
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: Suggested Citation