Difference between assignment and novation
Transferring an interest in a construction contract from one party to another can be done by either assignment or novation. The differences are minimal but important to understand, as the assignment of an interest when it could be novated might render one party liable for the contract if the other party is unable to perform their obligations.
Assignment is the right to transfer 'choses in action' defined as 'all personal rights of property which can only be claimed or enforced by action and not by taking physical possession'. This definition includes benefits arising under a construction contract such as right to payment, but not burdens such as the obligation to pay. The definition also includes claims for breach of contract.
A common error is to assume that the right to assign must be agreed as part of a contract, like a novation. Assignment is a unilateral right created by statute, Section 136 of The Law of Property Act 1925 or by the law of equity (law developed by the Chancery Division of the High Court of England and Wales). However, the right to assign can be excluded, or restricted, by contract, for example, it is common in collateral warranties to restrict to one assignment without the written permission of the warrantor.
By comparison, novation is a process in which the contractual rights and obligations are transferred to a third party. The benefits and the burdens can be transferred by a novation agreement, rather than just the benefits as with assignment. In building design and construction, novation normally refers to the process by which design consultants are initially contracted to the client, but are then 'novated' to the contractor.
[edit] Related articles on Designing Buildings
- Alienation covenant.
- Assignment.
- Assignment of choses in action.
- Assignment of debt.
- Collateral warranties.
- Difference between collateral warranties and third party rights.
- Legal and equitable assignment.
- Novation.
- Novation agreement.
- Privity of contract.
- Restrictions on assignment.
- Reverse premium.
- The Contracts (Rights of Third Parties) Act.
Featured articles and news
Delayed, derailed and devalued
How the UK’s planning crisis is undermining British manufacturing.
How much does it cost to build a house?
A brief run down of key considerations from a London based practice.
The need for a National construction careers campaign
Highlighted by CIOB to cut unemployment, reduce skills gap and deliver on housing and infrastructure ambitions.
AI-Driven automation; reducing time, enhancing compliance
Sustainability; not just compliance but rethinking design, material selection, and the supply chains to support them.
Climate Resilience and Adaptation In the Built Environment
New CIOB Technical Information Sheet by Colin Booth, Professor of Smart and Sustainable Infrastructure.
Turning Enquiries into Profitable Construction Projects
Founder of Develop Coaching and author of Building Your Future; Greg Wilkes shares his insights.
IHBC Signpost: Poetry from concrete
Scotland’s fascinating historic concrete and brutalist architecture with the Engine Shed.
Demonstrating that apprenticeships work for business, people and Scotland’s economy.
Scottish parents prioritise construction and apprenticeships
CIOB data released for Scottish Apprenticeship Week shows construction as top potential career path.
From a Green to a White Paper and the proposal of a General Safety Requirement for construction products.
Creativity, conservation and craft at Barley Studio. Book review.
The challenge as PFI agreements come to an end
How construction deals with inherited assets built under long-term contracts.
Skills plan for engineering and building services
Comprehensive industry report highlights persistent skills challenges across the sector.
Choosing the right design team for a D&B Contract
An architect explains the nature and needs of working within this common procurement route.
Statement from the Interim Chief Construction Advisor
Thouria Istephan; Architect and inquiry panel member outlines ongoing work, priorities and next steps.
The 2025 draft NPPF in brief with indicative responses
Local verses National and suitable verses sustainable: Consultation open for just over one week.
Comments