Agreement of innovation in a loan obligation: what it is and a sample

Definition of innovation

Novation (Latin novato - renewal, change) is a form of termination of an obligation by replacing the original obligation with another obligation.

An agreement between the parties that clarifies or determines the amount of debt and (or) the deadline for fulfilling the obligation without changing the subject and basis for the occurrence of the obligation is not in itself an innovation.

The concept of innovation is defined in paragraph 1 of Art. 414 of Part One of the Civil Code of the Russian Federation: an obligation is terminated by an agreement of the parties to replace the original obligation that existed between them with another obligation between the same persons (novation), unless otherwise established by law or follows from the essence of the relationship.

Otherwise, for example, clause 9 of Art. 142 of the Law “On Insolvency (Bankruptcy)”, which states that repayment of creditors’ claims by concluding an agreement on the novation of an obligation in bankruptcy proceedings is not allowed.

As an example of a prohibition of innovation arising from the essence of the relationship, one can cite the prohibition of innovation of an alimony obligation (see more about this below).

An agreement on novation entails not only the termination of the previous one, but also the emergence of a new obligation, which distinguishes novation from compensation. It should definitely follow from the novation agreement that the parties intended to replace the original obligation with another, which entails legal consequences for them, in particular the inability to demand fulfillment of the original obligation (clause 2 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 21, 2005 N 103 “ Review of the practice of application by arbitration courts of Article 414 of the Civil Code of the Russian Federation").

The essence of innovation

A contract is a written document. Novation is a legal term that means a change in the subject of the contract. These concepts are inextricably linked, since innovation involves the conclusion of a written agreement between the parties.

The peculiarity of the innovation is that the loan implies a certain interest rate. Accordingly, the lender will also be able to receive additional profit.

Novation is resorted to if one of the parties:

Missed a payment.
Delays payments that are required to be made (for example, rent).
Received funds as an advance, but does not ship the goods or provide the ordered service.

Reference! Novation can be made in all cases where the debtor is not able to answer for the obligations, but can fulfill them in another form.

Novation provides for the cancellation of old obligations. After the conclusion of the agreement, the previous debt is liquidated, and a form of repayment equivalent to the amount of the previous debt is used instead. In no case should you confuse the assignment (transfer of debt) and a simple change in the terms of the loan, in which the subject of the agreement remains the same.

Sample novation agreement

Sample agreement on debt novation from a supply agreement into a loan obligation. The parties came to an agreement to replace the debtor's obligation to the creditor arising from the contract for the supply of goods with a loan obligation (novation). All obligations of the creditor under the supply agreement terminate from the moment the novation agreement is concluded, including additional obligations

Agreement on the novation of debt from a purchase and sale agreement into a loan obligation. Sample. By an agreement on novation, the debtor's obligation to the creditor to pay for the goods on the basis of a purchase and sale agreement is novated into an obligation to repay the loan. The debtor's obligations under the purchase and sale agreement terminate from the moment the novation agreement is signed.

What is debt novation

This financial instrument differs from other actions with debts in several important parameters:

When a novation agreement is concluded, the subject of the debt or the method of its execution is replaced by another subject and method. If this condition is not met, the novation agreement will be invalid. For example, a company sells goods for a notional amount to its partner with a deferment. The payment deadline approaches and the partner understands that he cannot fulfill his obligations, while he has the opportunity to provide the company with services for upgrading the site for this amount. Accordingly, if the proposal is accepted by the company, an agreement is drawn up, which will be a novation.
This procedure requires the voluntary consent of both parties to the transaction. Unlike other instruments, for example, assignment, it is impossible to force a party to change the terms of the agreement, much less terminate it, therefore an agreement is concluded only during negotiations.
When novation occurs, the old obligation ceases, but at the same time the emergence of a new one is declared. That is, if, instead of paying the debt, the company transfers an apartment to the creditor for the same amount, the novation agreement will be inappropriate; this case will fit the concept of compensation, since with the transfer of the apartment the old obligation ends, but no new one arises.
The parties to the contract remain unchanged. In contrast to the same assignment, where the debt is transferred to a third party, the emergence of new participants in the transaction or the withdrawal of any party from the membership of participants when nominating the debt is unacceptable.
If the parties agreed to retain any additional requirements that accompanied the original obligation, they must be specified in the novation agreement. If there is no such designation, then such responsibilities are leveled along with the main ones.

Thus, it becomes clear that novation is a voluntary agreement of the parties to replace an object or method of fulfilling a debt with another object or method of fulfilling the duty of one participant in the relationship to another.

Intention to commit innovation as a necessary condition for innovation

As amended before June 1, 2020, paragraph 1 of Article 414 of the Civil Code of the Russian Federation contained almost the same definition of the concept of “novation”, but it stated that the agreement on innovation provides for a different subject or method of execution than the original obligation.

The version of this norm, effective from June 1, 2020, no longer contains any indication that novation occurs only when an obligation is replaced by another obligation with a different subject and method of execution. It only states that “the obligation is terminated by another obligation.”

This, however, does not indicate that any change by the parties to contractual obligations will be considered a novation. A necessary condition for novation is the intention of the parties to terminate the original obligation by establishing a new obligation. Such a new obligation could:

have a different legal nature without changing the direct subject of provision (according to paragraph 1 of Article 818 of the Civil Code of the Russian Federation, by agreement of the parties, a debt arising from a purchase and sale, lease or other basis can be replaced by a loan obligation);
relate to a different contractual type (for example, novation of an obligation to transfer property with an obligation to provide services or perform work),
differ from the original in another subject (for example, novation of a monetary obligation with an obligation to transfer another subject)
differ in other conditions or method of execution.

The intention to nominate must either be directly stated in the agreement of the parties, or unambiguously follow from its content.

If there is a dispute as to whether novation has taken place, the burden of proving such intention of the parties lies with the party relying on this circumstance. In this case, the general principle “novation is not intended” applies, and therefore, in case of doubt, the agreement should be considered as aimed at changing, and not terminating the obligation (see for more details paragraph 1 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 25, 2005 N 103).

On the will of the parties to terminate an obligation by novation . Clause 22 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated June 11, 2020 N 6 “On some issues of application of the provisions of the Civil Code of the Russian Federation on the termination of obligations” contains the following explanations:

“An obligation is terminated by novation if the will of the parties is definitely aimed at replacing the original obligation that existed between them with another obligation (Article 414 of the Civil Code of the Russian Federation). Novation takes place if the parties have agreed on a new subject and (or) basis for the obligation. An agreement to replace the original obligation with another can be formulated, in particular, by indicating the obligation of the debtor to provide only new performance and (or) the right of the creditor to demand only such performance.

If there is any doubt whether the will of the parties was aimed at concluding an agreement on novation or compensation, the agreement of the parties is interpreted in favor of the application of the rules on compensation (Article 409 of the Civil Code of the Russian Federation).”

Transferring a debt into a loan obligation

If all the conditions of Article 414 of the Civil Code of the Russian Federation are met, then it becomes possible to nominate the debt under the transaction into a loan obligation by mutual agreement of the parties. The reason for this decision may be:

delay in payment;
late payment of rent;
and any other inability to fulfill obligations under the contract.

Innovation will be another form of raising funds here, and the method of executing established agreements will change. If, due to debt novation, it becomes impossible to timely fulfill the demands of counterparties, then it is completely legal for them to request compensation for losses in the form of payment of interest for the delay. Thus, the legislation took care of the interests of third parties.

In cases where an obligation is replaced by a loan, the Civil Code establishes special requirements for the form of the novation agreement. According to Article 818 of the Civil Code of the Russian Federation, such an agreement is concluded in the form of a loan agreement in compliance with the following requirements:

between individuals it is necessary to formalize it in writing if the amount of debt is more than 10 times the minimum wage;
if a legal entity is involved in the case, then regardless of the amount, written form is required.

Debt novation can significantly make life easier for companies when counterparties fail, production is suspended due to force majeure, or a sudden cash shortage occurs. Compliance with the terms of the current agreement becomes impossible. With the consent of both parties, the debt can be converted into a loan obligation . For example, a supplier cannot provide a product; he has a debt to a buyer who has already paid for the product. Using debt novation, they become the borrower and lender, and the supplier agrees to repay the money with interest within the agreed period. Payment for goods becomes a loan, and the claim on the original debt ceases.

Novation of debt must be reflected in tax and accounting records. Under the original contract, the supplier received an advance for the goods, the amount of which was not taken into account either in the buyer's expenses or in the seller's income. The goods were never shipped, the participants had neither income nor expenses, and this means that the usual modification of obligations will not lead to an adjustment of the tax base of the participants.

When it comes to converting a debt into a loan obligation, the consequence of this decision will be the payment of interest, that is, income for one party and expenses for the other.

Once the agreement is signed, the buyer's advance becomes a loan to the supplier. In accordance with the norms of the Tax Code of the Russian Federation, the loan is not taken into account in the cost of income. The tax base of the debtor (supplier) will decrease by the amount of interest on the loan, and in which reporting period this will happen depends on the period specified in the novation agreement.

From the buyer's perspective, the situation is reversed: he becomes a creditor and will receive interest on the loan. Taking this into account, a tax base is formed with interest included in the amount of non-operating income. The accounting procedure, as in the case of the supplier, depends on the term of the loan.

It is not a novelty to change certain terms of the contract

Novation should be distinguished from a simple change in individual terms of an obligation. If, for example, there are changes in the deadline for fulfilling an obligation, the payment procedure, the amount of liability, etc. was not accompanied by an obvious intention to carry out the innovation, the original obligation does not terminate, but continues to operate in a modified form. Such a change does not entail the legal consequences of the innovation, including those provided for in paragraph 2 of Art. 414 of the Civil Code of the Russian Federation.

Changing the timing and procedure for debt repayment is not innovation. Arbitrage practice:

“An agreement between the parties that clarifies or determines the amount of debt and (or) the deadline for fulfilling an obligation without changing the subject and basis for the occurrence of the obligation is not in itself an innovation” (clause 22 of Resolution of the Plenum of the Armed Forces of the Russian Federation No. 6).

“Changing the timing and procedure for repaying debt does not constitute a change in the method of fulfilling the obligation. According to paragraph 1 of Art. 450, paragraph 1, art. 453 of the Civil Code, an agreement on the procedure for repaying a debt represents a change in the loan agreement, therefore the obligations arising from the loan agreement have been preserved” (clause 1 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 21, 2005 N 103 “Review of the practice of application by arbitration courts of Article 414 of the Civil Code of the Russian Federation ").

“An agreement between the parties that changes the terms and procedure for settlements under the contract does not mean a change in the method of fulfilling the obligation, and therefore is not an innovation... From the additional agreements to international leasing agreements it follows that the parties have restructured the debt of the lessee: the terms and amounts payable have been changed. Such agreements are not recognized as a novation, since they do not provide for a different subject and method of execution, therefore, they do not terminate the original obligation” (extract from the ruling of the RF Armed Forces dated April 11, 2016 N 305-ES15-13919).

Novation agreement

Typically, borrowers pay back funds to their lenders. But if this is not possible, and the time has come to pay, a significant problem will arise. The creditor has the right to demand the return of his funds within a specified time. This can be done in court. But, if the parties want to resolve the issue peacefully, they can take a different route.

Modern legislation provides for the possibility of innovation. To do this, the parties to the conflict need to sign a special document - a novation agreement. It is drawn up in writing and exclusively with the mutual consent of both parties. Novation is the replacement of an original obligation with another.

Peculiarities! The novation agreement is a document confirming this replacement.

For better understanding, an example should be given. lent a large amount of funds to company B, which sells equipment. After the agreement expired, it turned out that the borrower did not have the money to repay the debt, but could provide computers instead. If the creditor agrees to such a condition, novation is carried out.

The essence of this document is a change in the subject of the transaction. That is, instead of a debt, the borrower forms a loan obligation. After concluding the document, he will be forced to return not the money, but the goods corresponding to the debt in value (or provide some service).

To enter into this agreement, the lender does not have to be registered as a legal entity. Individuals are allowed to participate in transactions. The parties can resort to an agreement on debt novation only if they are completely satisfied with its terms.

Types of contracts

Innovation can be carried out in two directions. Accordingly, two types of papers can be distinguished. These are the documents:

Fixing the change of debt to a loan obligation. An example of such an agreement is given above. Below you can see a sample document.
Fixing the change of a bill of exchange (goods or services can be used instead), a promissory note. In essence, this is a reverse contract. Instead of providing any services, the organization undertakes to pay money.

In any case, two nuances must be observed.

First, it is mandatory to have an initial loan agreement.
Secondly, as a result of signing the document, a new obligation must arise. If, for example, as a result of drawing up an agreement, the debt does not change, but is transferred to another person, there is not a novation, but an assignment agreement.

Legislative regulation

Concluding an agreement is a legal procedure provided for by current legislation. This process is mainly regulated by the Civil Code. There are four laws to pay attention to:

Art. 407 provides for the possibility of termination of a debt obligation in the event of the occurrence of grounds provided for in other articles of the Civil Code.
Art. 414 regulates the possibility of signing a novation agreement, which is the basis for the entry into force of article number 407.
Art. 808 controls the form of composition. In accordance with it, the agreement is concluded in writing. For individuals, a similar need is provided if the value of the subject of the agreement exceeds 10 minimum wages.
Art. 818 provides individuals and legal entities with the opportunity to replace debt with a loan obligation.

It should be noted that the contract may be canceled if violations are discovered. If one of the parties is a legal entity, the document is always drawn up in writing, regardless of the amount of the transaction.

Essential terms of the novation agreement

The essential terms of the novation agreement are:

an indication of the new (initial) obligation sufficient for its identification (reason for occurrence, nature, subject),
condition on the purpose - termination of the new (initial) obligation by establishing a new one,
designation of the new obligation (its subject and quantitative characteristics). The need to agree on the subject of a new obligation is indicated in paragraph 27 of Resolution of the Plenum of the Supreme Court of the Russian Federation No. 6, which explains that “in addition to indicating the initial obligation in the novation agreement, the subject of the new obligation and other conditions necessary for an agreement of the corresponding type must be agreed upon (paragraph 1 Article 432 of the Civil Code of the Russian Federation). For example, if in exchange for the initial obligation the debtor undertakes to transfer ownership of the goods, then the novation agreement must indicate the name and quantity of the goods (clause 3 of Article 455 of the Civil Code of the Russian Federation).”

When should it be done?

Let's look at examples when novation of a debt into a loan would be appropriate.

The first option: to facilitate debt collection from the debtor. Often, in mutual settlements with regular customers, an enterprise may simultaneously be in debt for several dozen reasons - deliveries could be carried out according to different invoices, specifications and even contracts. Moreover, some of the primary documents may be paid almost in full, while for other documents the statute of limitations may be coming to an end. If the parties reconcile settlements and enter into an agreement to nominate “accumulated” debts as a loan, then it will be easier for the seller to track payment deadlines and collect overdue payments. Since from the moment of innovation the basis for the debt will change, and the buyer will not be able to dispute it, citing defects in the goods.

Second option: avoid problems with tax authorities. Typically, contracts with buyers provide for certain penalties for late payment for delivered goods, but suppliers often do not charge them, not wanting to spoil relations with business partners. Moreover, in such situations, inspectors require the creditor to recognize income in tax accounting for the amount of the “virtual” penalty. After the debt is novated, the controllers' demand will be unlawful.

And the third option: the innovation will help reduce losses due to currency fluctuations. Until recently, it was a common practice for parent companies located abroad to finance their subsidiaries operating in the Russian Federation by providing deferred payments for goods supplied. At the same time, the debt to the parent company was denominated in foreign currency. The sharp growth and significant fluctuations in the ruble exchange rate over the past two years have significantly worsened the performance of subsidiaries due to the resulting losses from the revaluation of foreign currency liabilities. Carrying out innovation on such debts can significantly reduce losses “on the balance sheet” due to exchange rate fluctuations.

Form of novation agreement

The form of the novation agreement is determined according to the general rules of Chapter 9 of the Civil Code of the Russian Federation on the form of transactions and Articles 434 and 452 of the Civil Code of the Russian Federation on the form of contracts.

In the case where an obligation arising from a registered agreement is novated, the corresponding novation agreement is also subject to state registration, since, in essence, such an agreement entails a change in the registered agreement (Clause 2 of Article 164 of the Civil Code of the Russian Federation). But the consequence of the absence of such registration will not be the invalidity of the innovation, but the absence of such an agreement of legal consequences in relation to third parties (clause 3 of Article 433 of the Civil Code of the Russian Federation).

Form of initial transaction and form of novation agreement . Paragraph 28 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated June 11, 2020 N 6 contains the following explanations:

“It should be taken into account that in relation to the original contract and the contract arising between the parties as a result of novation, different requirements for the form may be established, for example, due to the fact that the resulting contract belongs to a different contractual type or in relation to transactions with property, which the debtor is obliged to provide in fulfillment of the new obligation, special requirements for the form are established. In this case, the most stringent of these rules on the form of the transaction are subject to application to the novation agreement (clause 1 of Article 452 of the Civil Code of the Russian Federation).”

Concept of debt obligation

Debt obligations are represented by certain relationships that arise between two parties, which are the lender and the borrower. Based on a special agreement, funds are transferred from one person to another as a loan under certain conditions.

The person or company that took this money for temporary use at interest has a debt obligation that must be fulfilled, taking into account the conditions discussed during the preparation of the loan agreement.

Important! Such contacts can be made by both individuals and different companies. If it is necessary to carry out innovation, then the main condition for this is that the loan agreement itself must be drawn up correctly.

Particular attention is paid to the subject of the transaction, and this may include:

money;
equity participation in the construction of a facility, and the debtor is obliged to receive a finished property from the builders;
purchase or sale of any property;
provision of items, real estate or transport for rent.

Cases of admissibility of innovation

Novation of a long-standing obligation (i.e., an obligation for which the statute of limitations has expired) is permissible. In paragraph 29 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated June 11, 2020 N 6, it is stated that “the expiration of the limitation period for the initial obligation does not prevent the conclusion of an agreement on innovation. The limitation period for an obligation arising as a result of novation begins to run anew from the moment determined on the basis of the rules on limitation of actions (Article 200 of the Civil Code of the Russian Federation).”
The novated (initial) obligation may be non-contractual (novation of an obligation due to damage to property or unjust enrichment is acceptable).
Autonomous novation of the obligation to pay a penalty is allowed (for more details, see clause 5 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 25, 2005 N 103).
Novation of several initial obligations into one obligation is allowed (for example, several debts under several agreements are novated into one loan obligation). An innovation that leads to the emergence of several obligations in place of the terminated (initial) one is also acceptable.
By agreement of the parties, a debt arising from purchase and sale agreements, leases or other grounds, including obligations arising from unjust enrichment, damage to property or the return of what was received under an invalid transaction, can be replaced by a borrowed obligation (for more details see paragraph 24 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated June 11, 2020 N 6).
There is no prohibition on novation of part of a divisible obligation.

Procedure for drawing up an agreement

If it is decided that it is not possible to fulfill the obligations, you must follow the instructions:

you need to contact the Creditor with a proposal for debt novation;
negotiations are held during which various options for repaying the debt are discussed;
a profitable and feasible solution is found for both parties;
a draft agreement is being prepared;
the agreement is signed and sealed by the parties;
The accounting department of each party prepares the necessary documents.

In a standard agreement, in addition to the date and place of conclusion of the agreement, personal data of the parties, rights, obligations and deadlines, information about the original debt and the obligation replacing it must be indicated. The agreement is drawn up in two copies, one for each of the parties, the copies are of equal legal force.

For the creditor, by the way, there is another advantage in the innovation - the limitation period is counted anew with the beginning of a new agreement.

Watch the video in which a lawyer explains how to correctly draw up a loan agreement:

Novation terminates additional obligations

By virtue of clause 2 of Article 414 of the Civil Code of the Russian Federation, novation terminates additional obligations associated with the original obligation, unless otherwise provided by agreement of the parties. Additional obligations associated with the initial obligation are legal relations for the payment of a penalty, collateral, etc. (Article 329 of the Civil Code of the Russian Federation). These obligations will continue to apply if this is expressly provided for by agreement of the parties.

“Unless otherwise provided by agreement of the parties, from the moment the agreement on innovation is concluded, the obligation to pay the penalty for the previous period ceases” (clause 4 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 21, 2005 No. 103 “Review of the practice of application by arbitration courts of Article 414 of the Civil Code of the Russian Federation” ).

Similar explanations are contained in paragraph 25 of the Resolution of the Plenum of the Armed Forces of the Russian Federation No. 6, which states the following:

“Unless otherwise provided by the novation agreement, from the moment such an agreement is concluded, additional requirements cease, including the obligation to pay for the period preceding the conclusion of the said agreement the penalty accrued in connection with the debtor’s delay in fulfilling the initial obligation (clause 2 of Article 414 of the Civil Code of the Russian Federation).”

Is it possible to terminate bail and surety by innovation?

The ability of the parties to provide for the “survival” of additional obligations applies only to those that existed exclusively between those parties. For this reason, such additional obligations as pledge and surety cannot be kept in force by novation; the terms of the agreement on this are void.

On this issue, the Presidium of the Supreme Arbitration Court of the Russian Federation indicated the following:

The norm of Article 414 of the Civil Code of the Russian Federation is special in relation to the norm of subsection. 1 clause 1 art. 352 that the pledge terminates with the termination of the obligation secured by the pledge, and it is precisely this that must be applied when resolving the dispute. However, when interpreting it, it must be borne in mind that in the event of an agreement to replace the initial obligation with another obligation, the parties may provide for the continuation in force of additional obligations related to the original one, but only those that existed between them (see clause 6 of the information letter of the Supreme Arbitration Court RF dated December 25, 2005 N 103).

As a result of the innovation, the guarantee and pledge are terminated . In paragraph 26 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated June 11, 2020 N 6, it is explained that measures provided by a third party to ensure the fulfillment of an obligation terminated by novation are terminated along with this obligation, unless otherwise established by agreement with the person who provided the appropriate security:

“If, to secure the original obligation, a guarantee was issued or a pledge was provided by a person who is not a debtor under this obligation, then as a result of the novation, these guarantees are terminated (clause 1 of Article 335, clause 1 of Article 367 of the Civil Code of the Russian Federation). Security issued by third parties is preserved in relation to the obligation that has arisen if the guarantor or mortgagor has expressly agreed to their preservation, including in advance, before the conclusion of the novation agreement.”

Registration process

The parties can draw up an agreement themselves. There is no need to contact a lawyer for this. There is no single form of document regarding the novation of a loan agreement.

Accordingly, during its preparation it is necessary to be guided by the norms of the Civil Code. Alternatively, you can use the form of the first document.

In this case, it is necessary to take into account the following conditions for concluding the contract:

The signatories of the document do not change; the parties are the same as when drawing up the original document. Both participants must agree to change the terms.
The item must be changed, otherwise it will not be considered a contract of novation.
There must be a connection between the papers. That is, the document must indicate which obligation is changing.

Therefore, you should write down all the conditions, otherwise you may run into trouble later. You also need to keep in mind that the innovation cannot be applied to alimony and payments related to the health and life of citizens.

Document structure

There should not be any difficulties with drawing up the contract. It is recommended to adhere to the following structure:

Title, date and place of compilation. It is recommended to register each of the parties immediately below these data.
Definition of the subject of the contract. In this part, it should be indicated that one of the parties has incurred a debt, which must be converted by drawing up an agreement.
Terms of use of funds. At this point it would be useful to indicate the current interest rates and the amount of penalties.
Dispute resolution. Important point. It prescribes a mechanism for resolving disputes that may arise between the parties.
Additional terms and conditions. This part of the document should contain all the nuances that are not included in other paragraphs.

After this, the details of each party are written down and signatures are affixed.

Document structure

Title, date and place of compilation. It is recommended to register each of the parties immediately below these data.
Definition of the subject of the contract. In this part, it should be indicated that one of the parties has incurred a debt, which must be converted by drawing up an agreement.
Terms of use of funds. At this point it would be useful to indicate the current interest rates and the amount of penalties.
Dispute resolution. Important point. It prescribes a mechanism for resolving disputes that may arise between the parties.
Additional terms and conditions. This part of the document should contain all the nuances that are not included in other paragraphs.

Read about the conditions and procedure for bankruptcy of a deceased citizen.

And about whether people are imprisoned for non-payment of a loan in Russia.

article “Features of bankruptcy of insurance companies.”

Novation of alimony obligations and obligations to compensate for harm to life and health

Paragraph 2 of Article 414 of the Civil Code of the Russian Federation in its original wording established that novation is not allowed in relation to obligations to compensate for harm caused to life or health, and to pay alimony.

These provisions were not included in the new edition of this article.

Instead, in paragraph 1 of Art. 414 of the Civil Code of the Russian Federation there is an indication that a ban on innovation may arise from the essence of the relationship. Since obligations to compensate for harm to life and health, as well as alimony obligations are aimed at ensuring the particularly significant interests of citizens, such obligations cannot be novated. The possibility of their termination in a manner other than execution is excluded.

Bill novation procedure

As a result of negotiations, the parties must come to the conclusion that the bill obligations cannot be terminated within the agreed time frame. Since the extension of the relationship is beneficial to both participants, controversial situations should not arise.
The current bill of exchange and the previous agreement, based on the agreement of the parties, lose their legal force. Instead, a new contract is drawn up and new securities are issued with similar previous obligations, but with a different maturity. Novation in this case is an updated contract with re-accounted obligations of the parties.
Novation of a bill involves the revision or addition of interest, the amount of debt and other conditions and is defined as an independent legal procedure.
Novation of a bill of exchange is resorted to in the case when the fulfillment of a loan obligation is carried out not with money, but with part of the debt or by restructuring the loan into securities.