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
Amendment to the GB Energy Bill welcomed by ECA
Move prevents nationally-owned energy company from investing in solar panels produced by modern slavery.
Gregor Harvie argues that AI is state-sanctioned theft of IP.
Heat pumps, vehicle chargers and heating appliances must be sold with smart functionality.
Experimental AI housing target help for councils
Experimental AI could help councils meet housing targets by digitising records.
New-style degrees set for reformed ARB accreditation
Following the ARB Tomorrow's Architects competency outcomes for Architects.
BSRIA Occupant Wellbeing survey BOW
Occupant satisfaction and wellbeing tool inc. physical environment, indoor facilities, functionality and accessibility.
Preserving, waterproofing and decorating buildings.
Many resources for visitors aswell as new features for members.
Using technology to empower communities
The Community data platform; capturing the DNA of a place and fostering participation, for better design.
Heat pump and wind turbine sound calculations for PDRs
MCS publish updated sound calculation standards for permitted development installations.
Homes England creates largest housing-led site in the North
Successful, 34 hectare land acquisition with the residential allocation now completed.
Scottish apprenticeship training proposals
General support although better accountability and transparency is sought.
The history of building regulations
A story of belated action in response to crisis.
Moisture, fire safety and emerging trends in living walls
How wet is your wall?
Current policy explained and newly published consultation by the UK and Welsh Governments.
British architecture 1919–39. Book review.
Conservation of listed prefabs in Moseley.
Energy industry calls for urgent reform.
Comments