Also known as: assume contractual duties · assumed contractual duties · assuming contractual duties · delegation of duties · novation
Written by attorneys · grounded in primary & secondary sources — see below
An agreement by which a third party undertakes to perform duties that an original obligor owes to an obligee under an existing contract. The original obligor is discharged only if the obligee consents to a novation substituting the new party.
Aether Technologies negotiated with Alliance Holdings and Apex Dynamics to take over Apex's ongoing equipment supply obligations to Alliance. The three parties executed a new agreement under which Aether would deliver the remaining shipments and Alliance would release Apex from further performance. When Aether later failed to deliver, Alliance pursued Aether directly and could not revive claims against Apex.
Alliance Holdings promised Aether Technologies that it would pay a preexisting debt Aether owed to Apex Dynamics. Apex learned of the promise from Aether and materially changed position by extending additional credit in reliance. When Alliance later attempted to modify the payment terms without Apex's consent, the modification was ineffective because Apex's reliance had made its rights irrevocable.
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Discharge occurs only when the obligee agrees to a novation that substitutes the new party for the original obligor. Mere delegation or assignment of duties does not release the original party unless the obligee consents to the substitution.
Yes. When an intended beneficiary materially changes position in justifiable reliance on the promise to assume the duty, the promisor and promisee lose power to discharge or modify the contract without the beneficiary's consent.
No. In the case of a promise to pay a debt of the promisee, the beneficiary may enforce the assumption without entering a novation, although a novation would also be effective.
The power ends when the beneficiary manifests assent to the promise in a manner invited by the promisor or promisee, even without a novation or change of position.