Jurisdiction(s):
United Kingdom

Key definition

Novation definition

What does Novation mean? In practice, novation is the substitution of one contracting party for another, so the outgoing party is released and an incoming party assumes the same rights and obligations under a new contract. It operates by extinguishing the original contract and creating a new one between the continuing party and the incoming party on substantially the same terms, rather than merely transferring rights or liabilities. Usually documented by a tripartite novation agreement (often a deed). A valid novation requires the consent of all parties. In England & Wales, Northern Ireland and Ireland, consideration is required at common law and novations are...

Novation in construction projects: consultant novation (ab initio and switch), formalities, implied novation, employer protections, collateral warranties, conflicts, and addressing the 'no loss' argument

Published by a LexisNexis Construction expert

Practice notes

What is Novation?

Novation describes the passing of a Contracting party’s rights and duties to a third party. In effect, one party to the agreement (the ‘outgoing party’) is replaced by another (the ‘incoming party’); in legal terms, the original agreement is discharged, amounting to the extinguishing of that contract and the creation of a new contract under which the same obligations must still be performed, albeit by different participants. Novation is not the same as Assignment: an assignment transfers only the benefits of a contract, whereas novation moves both the benefit and the burden to the incoming third party. Contractual benefits cover the right to have the contract performed; burdens comprise obligations such as carrying out the duties and making payments due under the contract. In practice, the incoming party takes over performance in place of the outgoing party. See Practice Notes: Assignment in construction contracts and Legal and equitable assignment in construction contracts.

Novation in the construction industry

Novation is most commonly used on construction projects in the following circumstances:

transfer of design consultants’ appointments from the employer to a design and build contractor. The design consultant provides design services to the employer initially, until such time as a building...

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Web page updated on 21/05/2026

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