The Fifth Circuit recently issued an opinion applying Louisiana law, holding that an attorneys’ fee provision in a commercial lease agreement was not enforceable because it was subsequently novated by another agreement between the parties that did not address attorneys’ fees. HDRE Bus. Partners Ltd. Grp. v. RARE Hosp. Int’l, No. 15-30487 (5th Cir. 2016).
In Texas novation is generally described as the substitution of a new agreement between the same parties to or the substitution of a new party on an existing agreement. Under Texas law, if a novation occurs, generally only the new agreement will be enforceable. Novation can be an unintended result when parties to an agreement execute a subsequent agreement without first considering the potential effect of that new agreement on their existing agreement, i.e., do the parties intend for that new agreement to cancel the existing agreement or do the parties wish to preserve rights and obligations under their existing agreement? Otherwise, once that new agreement is signed, the parties may have waived benefits or rights of an earlier agreement even if other side did not perform under that new agreement.
No information in this article is intended to constitute legal advice. For specific legal advice, please contact an attorney.
If you have any questions or would like more information about contract negotiation, novation or the enforceability of lease provisions, including those providing for recovery of attorney fees, please contact Eric Mettenbrink at 713.220.9141 or firstname.lastname@example.org.