Construction projects — what is novation?

In a recent blog post, Gateley discussed top tips for the assignment of reports and touched on novations if the burden (for example, the obligations for payment) is to be transferred. So what is novation?

Although novation has the effect of transferring obligations, the traditional view is that a novation is an agreement that replaces the original contract with another one on the same terms but with different parties.

The most common use of novation in construction projects is on design and build projects when the design team is ‘novated’ to the contractor. The effect of the novation is that, at the time of entering the novation agreement (which is usually when the building contract is signed), the employer under the consultant’s appointment is replaced by the contractor and the contractor steps into the shoes of the employer as if it had always been the employer from the outset…

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