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A substitution agreement transfers your rights or obligations under an existing agreement to a third party, who replaces you vis-à-vis the other party. That other party must, however, consent to this. You use this, for example, in an asset and liability transaction, so that the acquirer takes over the ongoing contracts with your suppliers or landlord without having to terminate and renegotiate them.
In principle, an agreement applies only between the parties that concluded it. If you enter into an asset and liability agreement, it has no effect against your suppliers: for them, you remain the customer, not the acquirer. To substitute the acquirer in your place, you enter into a substitution agreement.
What is a substitution agreement?
In a substitution agreement, certain rights or obligations towards another party are transferred to a third party, who takes your place. That third party can henceforth exercise the rights or obligations, whereas you can no longer. At least three parties are involved: the transferor, the transferee, and the party towards whom the rights or obligations applied. The latter must consent to the transfer.
Why do I need a substitution agreement?
It is often a practical solution, particularly in asset-liability transactions involving the acquisition of an association, foundation, or part of a legal entity. The old legal entity continues to exist and, without a substitution agreement, would still be the supplier's customer, even though it has already transferred its activities. With a substitution agreement, the new legal entity takes the place of the old one—without terminating the existing agreement or negotiating a new one.
Substitution and the transfer of a lease agreement
A special form applies to tenancy. In the case of commercial premises for small and medium-sized enterprises (such as shops), a tenant can sell their business and compel the landlord to accept the new owner as the tenant — this is known as substitution. The new tenant then assumes the rights and obligations of the old one; for example, the rent remains the same.
For other business and office space, that statutory substitution does not apply. In that case, a substitution agreement is required. The landlord may only refuse this with a substantiated objection, for example if the new tenant offers insufficient guarantees. If he refuses anyway, the other parties may take the matter to the subdistrict court.
Frequently Asked Questions
What is the difference compared to an asset and liability agreement?
The asset and liability agreement governs the transfer between buyer and seller, but does not bind the supplier or lessor. With a substitution agreement, the assignee also takes your place vis-à-vis that third party.
Does the other party have to agree?
Yes. The substitution requires the consent of the party against whom the rights or obligations apply, such as the supplier or landlord.
What is substitution?
A legal form of substitution in commercial premises for small and medium-sized enterprises, whereby a tenant can compel the landlord to accept the buyer of his business as the new tenant.
Have a substitution agreement drafted
A substitution agreement is custom-made. The legal experts at MKB Juristen draft the agreement so that you transfer rights and obligations without having to terminate existing contracts. View our expertise in contract law or schedule a free intake consultation .
