Novation Agreement Chile (Contrato de Novación)

A Novation Agreement Chile (Contrato de Novación) is a formal legal instrument governed by Articles 1628 to 1651 of the Código Civil de Chile (promulgated by Decreto Supremo No. 1.937 of 1855, in force since January 1, 1857) by which the parties extinguish an existing obligation and simultaneously create a new one in its place. Article 1628 defines novation as the substitution of a new obligation for an old one, which is thereby extinguished. Chilean novation doctrine — inherited from Roman law through the Spanish Siete Partidas and refined through successive amendments — treats novation as both an extinction mechanism and a contract-formation event occurring in a single legal act.

The Código Civil distinguishes four classical forms of novation. Novación objetiva (objective novation) occurs when the parties change the object or cause of the original obligation — for example, replacing a monetary debt with an obligation to deliver goods, or replacing a contractual cause with a tortious one. Novación subjetiva por cambio de deudor (subjective novation by change of debtor) takes two forms: expromisión, where a third party assumes the debt with the creditor's consent without the original debtor's intervention (Article 1635), and delegación, where the original debtor presents a new debtor and the creditor expressly consents to release the original debtor (Article 1636). Novación subjetiva por cambio de acreedor (subjective novation by change of creditor) resembles assignment of credit but differs fundamentally — while cesión de crédito under Articles 1901–1908 transfers the same obligation with all its accessories, novation extinguishes the original obligation entirely, and the new creditor receives a fresh right unencumbered by the original obligation's defects or accessory guarantees unless expressly reserved.

Article 1634 of the Código Civil establishes the essential requirement of animus novandi — the express or unequivocal intention to novate. Chilean courts have consistently held, through decisions of the Corte Suprema de Justicia and the Cortes de Apelaciones, that novation is never presumed: ambiguous modifications to existing contracts are interpreted as mere modifications (modificaciones), not novations. The practical consequence is that parties seeking to novate must include explicit language declaring the extinguishment of the prior obligation and the creation of a new one. Failure to include such language risks reclassification as a partial amendment, with potentially disastrous consequences — the original obligation, along with all its guarantees and accessory obligations (hipotecas, prendas, fianzas), would survive intact.

Under Article 1645 of the Código Civil, novation extinguishes all accessory obligations attached to the original debt — including mortgage guarantees (hipotecas) recorded with the Conservador de Bienes Raíces, pledge agreements (contratos de prenda) filed under the Ley 20.190 (Sistema de Registro de Prendas Sin Desplazamiento) or the Ley 18.112 (Prenda Sin Desplazamiento de la Posesión), personal sureties (fianzas) under Articles 2335–2383 of the Código Civil, and joint and several guarantees (obligaciones solidarias) under Articles 1511–1523. Article 1642 provides that the parties may expressly reserve these accessory obligations when agreeing to novate — but such reservation must be explicit and cannot be inferred from silence or course of conduct.

The Servicio de Impuestos Internos (SII) may treat novation agreements as taxable instruments depending on the nature of the new obligation created. Where the novated obligation involves real estate transactions requiring inscription with the Conservador de Bienes Raíces under Article 686 of the Código Civil and Reglamento del Conservador de Bienes Raíces (Decreto Supremo No. 41 of 1883), notarial formalities apply. The Notaría system in Chile — regulated by the Código Orgánico de Tribunales (COT) Articles 399–445 — provides legal certainty through authenticated instruments (escrituras públicas) that serve as executory titles (títulos ejecutivos) under Article 434 No. 2 of the Código de Procedimiento Civil.

Novation agreements are common instruments in corporate restructurings, debt refinancings, supplier chain substitutions, and insolvency proceedings under Ley 20.720 (Ley de Reorganización y Liquidación de Activos de Empresas y Personas). The Superintendencia de Insolvencia y Reemprendimiento supervises restructuring proceedings, and novation agreements forming part of approved reorganization plans are binding on all creditors who participated in the creditors' meeting (junta de acreedores) under Article 79 of Ley 20.720.

A Novation Agreement Chile is needed whenever contracting parties in Chile wish to formally extinguish an existing obligation and replace it with a fundamentally different one — rather than merely modifying terms of the original obligation. The critical distinction matters enormously: modification (modificación) preserves the original obligation and all its accessories (hipotecas, prendas, fianzas, solidaridad), while novation extinguishes everything unless expressly reserved under Article 1642.

Corporate debt restructuring is the most common commercial context requiring novation under Chilean law. When a Sociedad Anónima (SA) under Ley 18.046, a Sociedad por Acciones (SpA) under Articles 424–446 of the Código de Comercio, or a Sociedad de Responsabilidad Limitada (SRL) under Ley 3.918 renegotiates bank credit facilities with creditors such as Banco de Chile, Banco Santander Chile, or BancoEstado, the parties may use novation to replace the original credit agreement with an entirely new instrument on different terms — changing interest rates, payment schedules, or adding new collateral while releasing old guarantors.

Change of debtor scenarios require novation when a Chilean business acquisition involves assumption of the seller's existing contractual obligations. Under Articles 1635–1636 of the Código Civil, the buyer (new debtor) may be substituted for the seller (original debtor) through delegación — with the explicit consent of the creditor — thereby releasing the original debtor from liability. Without express novation, both the original and new debtor may remain jointly liable, creating unintended exposure.

Supplier substitution in long-term supply chains also triggers novation needs. When a primary contractor under a construction or mining contract covered by the Código de Comercio Articles 3–20 substitutes a new subcontractor for the original one, and the project owner (mandante) agrees to contract directly with the new subcontractor on amended terms, the novation extinguishes the original subcontracting obligation and creates a fresh direct obligation.

Insolvency-adjacent restructurings under Ley 20.720 (Reorganización y Liquidación) frequently employ novation agreements as instruments within court-approved reorganization plans (acuerdos de reorganización). The Superintendencia de Insolvencia y Reemprendimiento oversees these proceedings, and novation agreements forming part of approved plans bind all participating creditors. The Juzgados de Letras en lo Civil exercise jurisdiction over civil novation disputes, while the Juzgados de Letras de Comercio (commercial courts) handle commercial novation in the context of the Código de Comercio.

Change of creditor situations — such as when a financial institution (banco) transfers a loan portfolio to another bank and the parties prefer novation over assignment to avoid carrying over the original loan's defects — also require a formal Contrato de Novación. The SII requires documentary evidence of the original obligation's extinction for tax purposes, particularly where the original instrument was subject to Impuesto de Timbres y Estampillas under Decreto Ley 3.475.

A valid Novation Agreement Chile under Articles 1628–1651 of the Código Civil must contain specific elements to achieve its legal effect — extinguishing the original obligation and creating the new one.

Identification of All Parties: Full legal names, RUT numbers (Rol Único Tributario assigned by the Servicio de Impuestos Internos), cédula de identidad or passport numbers, and domiciles of all parties — original creditor, original debtor, and any new debtor or new creditor being introduced through the novation. Where parties are legal entities (Sociedad Anónima under Ley 18.046, SpA under Código de Comercio Arts. 424–446, SRL under Ley 3.918), include the company RUT, registered name, Registro de Comercio inscription details, and identification of the legal representative signing with sufficient mandato under Código Civil Article 2116.

Description of the Original Obligation: Precise identification of the original obligation being extinguished — including the contract or instrument creating it (with date, notarial protocol number if applicable, and Conservador de Bienes Raíces inscription if it involved real property), the nature of the obligation (monetary debt, obligation to deliver goods, obligation to perform services), the outstanding amount or remaining performance obligation, and any accessories (hipotecas, prendas, fianzas, solidaridad) that are being extinguished or reserved under Article 1642.

Expression of Animus Novandi: An explicit clause declaring the parties' intention to novate — not merely to modify. Chilean courts and the Corte Suprema de Justicia have consistently required unequivocal language stating that the original obligation is extinguished and replaced. Suggested language: 'Las partes declaran expresamente su animus novandi, convienen en extinguir la obligación original descrita en la Cláusula Segunda y en crear una nueva obligación en su reemplazo, conforme al Artículo 1628 del Código Civil.' Absent this language, courts will characterize ambiguous changes as modifications, leaving all original accessories intact.

Description of the New Obligation: Full terms of the new obligation replacing the original — new object, new debtor, new creditor, new amounts, new payment schedule, new interest rate (with express reference to whether it is a tasa de interés corriente certified by the Comisión para el Mercado Financiero (CMF) under Ley 18.010, or a contractually agreed rate within legal maximums), and any new accessories being created.

Reservation or Extinction of Accessories: Explicit clause addressing what happens to all accessory obligations under Article 1642. If hipotecas (recorded with the Conservador de Bienes Raíces), prendas (registered under Ley 20.190 Sistema de Registro de Prendas Sin Desplazamiento or Ley 18.112), or fianzas are to survive the novation, each must be expressly identified and reserved. If they are extinguished, include a clause instructing the relevant registry to cancel the inscriptions.

Tax Considerations: Reference to the Impuesto de Timbres y Estampillas under Decreto Ley 3.475 applicable to the new obligation if it involves credit instruments. The SII requires that the new instrument be stamped separately — the novation does not carry over the original instrument's tax treatment. Where the parties are related (partes relacionadas) as defined by the Ley sobre Impuesto a la Renta (DL 824/1974), transfer pricing rules under Article 41-E may apply to interest rate determinations in the new obligation.

Governing Law and Jurisdiction: Express submission to Chilean law and to the competent Juzgados de Letras en lo Civil for civil novations, or Juzgados de Letras de Comercio for commercial novations, with specification of the arbitration clause (cláusula compromisoria) if the parties prefer the Centro de Arbitraje y Mediación de Santiago (CAM Santiago) or the Centro de Arbitraje de la Cámara de Comercio de Santiago.

Execution Formalities: For novations involving real property obligations, the instrument must be executed as an escritura pública before a Notario Público (regulated by Código Orgánico de Tribunales Arts. 399–445) and inscribed in the Conservador de Bienes Raíces to be effective against third parties. For purely personal obligations, a private instrument with signatures authenticated (autorización de firmas) before a Notario Público provides sufficient legal certainty and constitutes a título ejecutivo under Article 434 No. 4 of the Código de Procedimiento Civil.

Forms-legal.com provides this Novation Agreement Chile template as a starting point. Every novation involving significant obligations — particularly those with real property accessories or amounts exceeding 3,000 UF — should be reviewed and executed with assistance from a licensed Abogado familiar with Chilean obligations law and the current practice of the Corte Suprema's Civil Chamber (Sala Civil) on novation jurisprudence. Los usuarios de forms-legal.com pueden descargar este documento de forma gratuita en formato PDF o DOCX, completar los campos del formulario guiado y obtener un documento listo para firma.