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
The benefits of engaging with insulation manufacturers
When considering ground floor constructions.
Lighting Industry endorses Blueprint for Electrification
The Lighting Industry Association fully supports the ECA Blueprint as a timely, urgent call to action.
BSRIA Sentinel Clerk of Works Training Case Study
Strengthening expertise to enhance service delivery with integrated cutting-edge industry knowledge.
Impact report from the Supply Chain Sustainability School
Free sustainability skills, training and support delivered to thousands of UK companies to help cut carbon.
The Building Safety Forum at the Installershow 2025
With speakers confirmed for 24 June as part of Building Safety Week.
The UK’s largest air pollution campaign.
Future Homes Standard, now includes solar, but what else?
Will the new standard, due to in the Autumn, go far enough in terms of performance ?
BSRIA Briefing: Cleaner Air, Better tomorrow
A look back at issues relating to inside and outside air quality, discussed during the BSRIA briefing in 2023.
Restoring Abbotsford's hothouse
Bringing the writer Walter Scott's garden to life.
Reflections on the spending review with CIAT.
Retired firefighter cycles world to raise Grenfell funds
Leaving on 14 June 2025 Stephen will raise money for youth and schools through the Grenfell Foundation.
Key points for construction at a glance with industry reactions.
Functionality, visibility and sustainability
The simpler approach to specification.
Architects, architecture, buildings, and inspiration in film
The close ties between makers and the movies, with our long list of suggested viewing.
SELECT three-point plan for action issued to MSPs
Call for Scottish regulation, green skills and recognition of electrotechnical industry as part of a manifesto for Scottish Parliamentary elections.
UCEM becomes the University of the Built Environment
Major milestone in its 106-year history, follows recent merger with London School of Architecture (LSE).
Professional practical experience for Architects in training
The long process to transform the nature of education and professional practical experience in the Architecture profession following recent reports.
Comments