Novation in Construction Contracts

Under the Novation all the rights and obligations are transferred to another party. 

If there is a contract between two parties and one party will be replaced with another new party and all the rights and obligations will transfer to that new party.

For an example, there is a contract between Employer and piling contractor to do the piling work. At the end of the piling, the building contractor start working on the project. But still piling contractor shall continue the dewatering work without stop until building construct up to a certain level. In this scenario, agreement between client and piling contractor will novate to piling contractor & building contractor with a novation agreement between those three parties.

Another best example is in design and build contracts. In most of the design and build contracts, clients are hiring design consultants to develop basic design up to certain extent and, then the design & build contractor will be appointed. 

There after design consultant will be working for Design and build contractor for further design development. Accordingly, rights, responsibilities and obligations shall be transferred to new parties with a novation agreement between three parties. 

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Problems in Novation Agreements