During the execution of a loan agreement, one party (the lender) transfers money to the other (the borrower), and the other party is obliged to return the specified amount to it within the agreed time frame. The agreement is considered concluded when the lender transfers money to the borrower.

Therefore, the borrower, having received the money, is obliged to return the money to the lender. But the situation does not always arise that the borrower can repay the entire loan amount.

In this case, if he is able to provide an alternative replacement for money (goods, services, bills, etc.), then a novation agreement is concluded.

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What it is

The Civil Code provides that in cases where a large number of rules are used that are designed to regulate the relations of the parties, agreements (purchase and sale, transportation, contract, etc.) must be concluded.

In the absence of detailed regulation of individual relationships between the parties in the code, they enter into agreements. In relation to innovation, you can use both options.

But when concluding an agreement, it is necessary to additionally draw up a transfer and acceptance certificate (of goods, bills, etc.)

Decor

When repaying a loan in goods, services, a bill of exchange, etc., an agreement on novation of the loan is concluded. It indicates that the parties have reached an agreement in this matter, and also determines the value of the products that are supplied against the loan.

This includes determining the fate of penalties and interest on the loan and the costs of packaging, loading and delivery of goods. Once the novation agreement is signed, the lender becomes the buyer and the borrower becomes the seller.

The lender's accountant performs the following actions:

• keeps records of products that have been received and are equal in value to the loan;
• enters this amount into the “expenses” section;
• indicates interest on the loan in the section “non-operating income”;
• transfers money that was issued as a loan into advance payments under supply contracts;
• records the delivered products, receives a shipping invoice and keeps records of incoming VAT.

With simplified taxation of the lender, the entire cost of goods goes into the “expenses” section, and the obligation becomes fully repaid.

But if only the main body of the loan is returned in goods, it will be necessary to reflect the interest received on it in a separate item.

The borrower, in turn, must perform the following actions:

• take into account the income received from the sale of goods;
• in the “expenses” column, indicate the purchase price of goods with which the loan is repaid, or the costs of their production;
• interest that must be paid to the lender is included in non-operating expenses;
• issue an invoice with VAT for advance payment within 5 days from the date of signing the contract;
• Having shipped the goods, issue a shipping invoice;
• charge VAT on the goods and record it in the journal.

Regulatory regulation

The basic rules governing the novation of debt are enshrined in Article 414 of the Civil Code of the Russian Federation, as well as in some provisions on certain types of obligations.

Article 414 regulates the termination of an obligation between two parties by novation, namely the replacement of the original obligation with a new one, providing for a different subject or method of repaying the debt.

It contains more specific information from Article 414, and also allows the novation of debt into a loan obligation. Replacing a loan with another product or service is carried out in compliance with the requirements of Art. 414 in the form provided for this type of document.

Concluding a novation agreement from a loan agreement is a legal and simple way to pay off a monetary debt as a result of drawing up a purchase and sale agreement, the provision of services or the transfer of bills.

on the termination by novation of the obligation under the purchase and sale agreement (the creditor received the right of claim as a result of an assignment by the former creditor)

Hereinafter referred to as the "Creditor", represented by acting on the basis of, on the one hand, and hereinafter referred to as the "Debtor", represented by, acting on the basis of, on the other hand, have entered into this Agreement as follows:

1. SUBJECT OF THE AGREEMENT

1.1. In accordance with Art. 414 of the Civil Code of the Russian Federation, the Creditor and the Debtor agreed to replace the initial obligation that existed between them under the Sale and Purchase Agreement No. dated "" 2020, signed in the year between (hereinafter referred to as the "Former Creditor") and the Debtor, to pay the amount of rubles with another obligation between the Creditor and the Debtor - the obligation of the Debtor to transfer to the Creditor the goods in the assortment and quantity agreed upon by the Parties. The right of claim under the Sales and Purchase Agreement No. belongs to the Creditor on the basis of the Assignment Agreement No. dated "" 2020, signed in 2020 between the Former Creditor and the Creditor.

1.2. Novation terminates additional obligations related to the initial ones, provided for in the Sale and Purchase Agreement No. dated "" 2020.

2. OBLIGATIONS OF THE DEBTOR

The debtor is obliged:

2.1. Transfer to the Lender the goods agreed upon in this clause within the time limits specified in this clause: . The goods are delivered by the Debtor at his own expense using his own transport to the following address: .

2.2. In accordance with Art. 313 of the Civil Code of the Russian Federation, the fulfillment of the Debtor’s obligations to the Creditor under clause 2.1 of this Agreement may be performed by a third party.

3. OBLIGATIONS OF THE LENDER

The creditor is obliged:

3.1. Accept from the Debtor or from a third party fulfilling obligations for the Debtor, goods under the terms of clause 2.1 of the Agreement in payment of obligations under clause 1.1.

4. VALIDITY, PROCEDURE FOR TERMINATION AND CHANGES OF THE AGREEMENT

4.1. This Agreement comes into force on the date of signing and is valid until its execution.

4.2. Any changes and additions to this Agreement are valid only if they are made in writing and signed by authorized persons of both Parties.

4.3. This Agreement remains in force in the event of a change in the details of the Parties, changes in their constituent documents, including in the event of a change in the legal form. The Parties are required to notify each other of changes in details within calendar days. From the moment the other Party notifies about the change in payment details, payments sent using the old details are not subject to offset.

5. RESPONSIBILITY OF THE PARTIES

5.1. If the Parties violate their obligations under this Agreement, they are liable in the manner and to the extent provided for by current legislation.

5.2. For delay in transfer of goods in accordance with clause 2.1, the Debtor shall pay a penalty in the amount of % per day of the cost of the goods to be transferred to the Lender.

6. OTHER CONDITIONS

6.1. Disputes that may arise between the Parties in connection with non-fulfillment or improper fulfillment by the Parties of the obligations assumed under this Agreement are subject to consideration in the Arbitration Court of the city.

To simplify, innovation is the replacement of one debt with another.

In the Civil Code of the Russian Federation, Article 414 is devoted to the concept of innovation.

We will look into all the nuances and features of this procedure below.

What is debt novation

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

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

Procedure and design features

Replacement of obligations is formalized in writing in two cases: if the debt is more than 1000 rubles and if the Creditor is a legal entity.

In addition, it is important to know that there are several cases where a novation agreement is not possible.

Thus, it is prohibited to replace one’s obligations with others if the obligations are related to the person’s personality, namely:

• compensation for harm caused to life;
• compensation for damage caused to health;
• payment of alimony.

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.

It is important to know: the novation agreement is drawn up in the form of a loan agreement.

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.

Specialist's note: as a rule, debt novation is beneficial to both parties, because the method of solving problems in court does not always lead to the desired result, thus, during the procedure, the creditor receives his money in one form or another, and the debtor receives the opportunity to pay off his debts in a way convenient for himself .

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:

; This is the termination of previously assumed obligations under a contract and their replacement with others by agreement of the parties with a change in the subject or method of execution. An example of such a procedure would be the replacement of a loan agreement with a bill or bond issued by the debtor. It is important to note: novation implies the termination of requirements regarding the original agreement.

The law also provides a list of obligations in relation to which the novation procedure does not apply; This includes obligations to compensate for harm caused to life and health and to pay alimony. Art. 414 of the Civil Code of the Russian Federation also establishes the termination of additional obligations in addition to the main ones specified in the initial agreement.

Banks also use the opportunity for innovation by restructuring the client’s debt. This happens when the borrower, due to, for example, a reduction in wages, is no longer able to repay the loan under the terms of the current agreement, and the bank decides to enter into a new agreement with more lenient payment terms. At the same time, the loan term and interest rates change. Novation of the debt in this case is much more profitable for the credit institution than late payments by the client and transfer of the debt to collectors; after all, it is better for her to still receive the money, albeit later than initially agreed, than to lose the client and interest when transferring the debt to third parties. The opposite situation is also possible, when the client’s income increases and he wants to quickly get rid of debts to the bank; then an agreement is concluded between the credit institution and the borrower providing for a shorter period and, in most cases, a lower interest rate.

Novation is different from assignment. The second term involves the assignment of rights to claim a debt, that is, the composition of the parties to the agreement changes, which does not happen with novation. If your creditor has a debt to a third organization, then he can, without your consent, transfer the right to claim the debt for collection from you, thereby releasing himself from obligations. Novation presupposes the consent of all participants in the agreement.

As for changing the subject of the agreement: with this procedure, repayment of the debt can be made in goods, services, or bills. The agreement specifies the volume of products that will be used to pay off the debt, the amount of costs for packaging, loading, and delivery of goods. This is the benefit of such transactions for legal entities - debt repayment becomes possible even if there is a shortage of funds in the company. In this case, as soon as the agreement is formalized, the borrower becomes the seller, and the lender becomes the buyer.

In international financial relations, innovation requires the presence of three participants; it is more similar to an assignment, with the only difference being that such a transaction requires the consent of all participants.

Novation agreement

Let's consider the conditions for concluding a novation agreement. What must be done for it to be considered valid:

• All essential terms of a new obligation terminating the old one must be agreed upon in the required form.
• Novation of a debt is a transaction, therefore the agreement on it should not fall under the conditions of invalidity specified in the Civil Code of the Russian Federation. If the invalidity of the transaction is determined, the parties will remain bound by their obligations in accordance with the original agreement with all the ensuing consequences.
• Naturally, the main transaction that they want to nominate must also be valid, because novation terminates obligations only under a previously concluded agreement, which must be correctly executed.
• The agreement must state the intention of the participants to replace the original obligation with another, and it must be noted that the claims under the first agreement will lose all grounds. Otherwise, the new obligation will operate alongside the old one and will not replace it.
• Changing sides in this case is not allowed. Novation can change only the subject of the contract and the method of execution, but not the participants, unlike an assignment. Just as in the previous case, if the requirement is not met, the old agreement does not terminate, but in addition a new one appears.

Particular attention should be paid to the possibility of changing the subject of the contract. Novation of debt will replace the obligation to perform work under an agreement for the transfer of property or payment of funds.

Paragraph 3 of Article 414 of the Civil Code of the Russian Federation stipulates that, in the general case, novation terminates additional obligations unless the parties agree otherwise. It is important to understand how this can turn out in practice.

Such additional obligations may be a pledge, surety, deposit, penalty or retention of property. For example, proper performance of a lease agreement is usually secured by a deposit from the tenant. If the parties subsequently agree to purchase and sell the said property, the original agreement will terminate.

This means that along with it the pledge will cease to exist as an additional obligation, unless the parties stipulate other conditions in the new agreement. Payment for the newly purchased property will not be secured by collateral, meaning the seller will be left without insurance. The novation would ensure the continued validity of the pledge agreement and its enforcement of the buyer's obligations.

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, which 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.

Sample agreement

The novation agreement must meet the requirements of the Civil Code of the Russian Federation. Below is a sample of a properly executed agreement.

The form of the document “Agreement on the novation of an obligation” belongs to the heading “Agreement”. Save the link to the document on social networks or download it to your computer.

AGREEMENT
on the novation of an obligation arising from agreement No. ______ dated _________
on the sale of tourism products

Moscow city, ____________

Limited Liability Company "_________" (TIN _________, KPP __________, OGRN __________; legal address: ______________________; location:_____________________; tel. ___________; working hours: from ____ to _____, Saturday from _____ to _____, Sunday is a day off), hereinafter referred to as “________”, represented by the General Director _______________, acting on the basis of the charter, on the one hand, and citizen ___________, passport ___________, issued by the district office ________ OUFMS of Russia in the city. Moscow in the South-Western Administrative District _________, subdivision code ________, registered at the address: ________________________, acting on its own behalf, hereinafter referred to as “Party-2,” collectively referred to as the “Parties,” have entered into this agreement as follows.

1. Subject of the agreement
1.1. ___________ of the year, the Parties entered into agreement No. ____ on the sale of a tourism product, according to which Party-1, called the “Agency,” assumed an obligation (hereinafter referred to as the initial obligation) to sell a tourist product: a vacation for three persons in Egypt with a trip to ________ and return of the ___________ year, formed by the tour operator LLC “___________” (registration number of the tour operator in the Unified Federal Register: MTZ series No. _________), and Party-2, called “Tourist”, was obliged to pay for the tour and services for its implementation in the total amount of ___________ rubles.
The Parties confirm that the obligation of Party-2 to pay for the tour and services for its implementation in the total amount of _________ rubles was fulfilled properly in full and on time, while Party-1 did not fulfill the initial obligation.
Thus, at the time of concluding this agreement, Party-1 has a debt to Party-2 under the initial obligation in the amount of ________ rubles.
1.2. The Parties replace the original obligation with a loan obligation between the same persons in the amount of _________ rubles.
1.3. Party-1 undertakes to return to Party-2 the amount specified in subclause 1.2 in accordance with the Settlement Procedure, which is an integral part of this agreement (Appendix No. 1__.
1.4. The initial obligation terminates on the day the Parties sign this agreement.

2. Loan terms
2.1. The loan under this agreement is provided at an interest rate equal to the refinancing interest rate (discount rate) established by the Central Bank of the Russian Federation for the corresponding period. However, if Party-1 makes payments on the loan obligation ahead of the deadlines established by the Settlement Procedure, the specified percentage is not charged by Party-2.
2.2. The date of provision of the loan is considered to be the day the initial obligation arose.

3. Liability for failure to fulfill a loan obligation
3.1. In case of untimely repayment of the loan amount and payment of interest for the use of the loan amount, Party-1 shall pay in favor of Party-2 interest for the use of other people's funds under the conditions provided for in Article 395 of the Civil Code of the Russian Federation.

4. Dispute resolution
4.1. In the event of disputes arising under this agreement, the Parties undertake to take measures to resolve them through negotiations.
4.2. If the measures established by subclause 4.1 turn out to be insufficient, disputes between the Parties shall be resolved in court in accordance with the civil legislation of the Russian Federation in force at the time of conclusion of this agreement.

5. Final provisions
5.1. Any changes to this agreement are valid only if they are made in writing and signed by the Parties or their authorized representatives.
5.2. In everything that is not provided for in this agreement, the Parties are guided by the legislation of the Russian Federation.
5.3. This agreement is concluded in two copies - one for each of the Parties, both copies have equal legal force.

6. Signatures of the Parties

Limited Liability Company "_________"
__________________

CEO:

(signature)

______________________________________
(surname, acting)

______________________________________
(signature)

______________________________________
(surname, acting)

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