Novation, Variation and Rescission - A Question of Intention?
Look Chan Ho
Freshfields Bruckhaus Deringer LLP
July 6, 2008
Corporate Rescue and Insolvency, Vol. 1, No. 95, 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.
Number of Pages in PDF File: 6
Keywords: Novation, variation of contract, contractual amendment, rescission
JEL Classification: K10, K12, K19, K20, K29, K30
Date posted: July 7, 2008