Construction Law/Novation


Hello Sir, my question is the following:
Suppose there's a pending claim  between a Subcontractor and the Contractor (which is not going to be settled anytime soon) and the Contractor has agreed with the Employer to novate all the Subcontracts to the Employer himself (Contractor wants to get out of the project). How can the novation process take place in light of the above mentioned claim? knowing that, from the Subcontractor's point of view, both the Contractor and the Employer at at fault in relation to this submitted claim.
Can the Subcontractor go ahead with the novation and transfer the claim altogether against the Employer? what do you think is the best step for the Subcontractor?

Best Regards

Dear Abed,

An interesting question.  Now is the time when you have greatest leverage, if the main contractor wants to get out of the project.  I suggest that you get your claim resolved, even at a slightly lower figure, before you accept the novation.  I suggest that the Contractor is likely to renounce all claims as part of his exit strategy.  If he renounces all claims, then the Employer will not allow you to transfer a claim against the Contractor to the Employer.  Alternatively, get your right to the claim written into the novation agreement, but this would be a dangerous, and potentially expensive, strategy.  

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Peter M. Elliott


First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol before submitting a question.


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