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A Letter of Novation is a critical legal instrument used in Pakistani business and commercial transactions when one party needs to be replaced by another in an existing contract. This document type is essential in scenarios such as corporate restructuring, business acquisitions, or when a party wishes to permanently transfer their contractual obligations to another entity. Governed by the Contract Act 1872 of Pakistan, the letter must clearly identify all parties involved, specify the original agreement being novated, and explicitly state the transfer of rights and obligations. The document becomes particularly relevant during mergers and acquisitions, company reorganizations, or when businesses need to reassign contracts due to operational changes. It differs from assignment as it creates a new contractual relationship while terminating the original party's obligations, requiring the consent of all parties involved. The letter must comply with Pakistani stamp duty requirements and may need registration depending on the nature of the underlying contract.

1. Date: The effective date of the novation

2. Parties' Details: Full names, addresses, and roles of all parties involved (original party being replaced, new party taking over, and continuing party)

3. Original Agreement Reference: Details of the original agreement being novated, including its date and parties

4. Background: Brief explanation of why the novation is necessary and what it aims to achieve

5. Novation Statement: Clear statement of the transfer of rights and obligations from the outgoing party to the incoming party

6. Effective Date: Specification of when the novation takes effect

7. Release of Original Party: Statement releasing the outgoing party from their obligations

8. Governing Law: Confirmation that Pakistani law governs the novation