Novation

Novation

What is a novation and how does it arise in a construction context?

The following provides an overview of the use of novation in the construction industry: what it is, the effect of novation, issues that arise in relation to it and practical considerations. For a detailed consideration of these points, see Practice Note: Novation in construction projects.

Novation is the transfer of the rights and obligations that one party has under a contract to a third party. Novation is distinguished from an assignment as it allows for burdens and obligations to also be transferred to the third party, not just rights. See Practice Note: Assignment in construction contracts. It most commonly arises where projects have been procured on a design and build basis, whereby a design consultant’s appointment is novated from the employer to the design and build contractor.

Novation amounts to the extinguishing of the original contract and the substitution of a new contract under which the same acts and obligations are

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