Issues Arising Under Novation Agreement-Free-Samples for Students

Question: In order to counteract the effect of Blyth Blyth Limited v Carillion Construction Limited and so protect and further strengthen the position of the contractor under a novation agreement outline the terms of a set of provisions that might be incorporated into a typical novation agreement. Answer: Novation Agreement It is to be mentioned that novation agreement is a system of transferring the rights of one of the parties to a contract to another party[1]. For example a contract between A and B can be transformed into a contract between A and C by the use of a novation agreement. However for such transfer of rights of one of the parties to another, it is essential that all the three parties agree to the terms of the contract. Further it can be stated in accordance with the example given above, if B fails to perform his duty as bound by the terms of the contract between A and B, A can only sue B for breach of contract terms and not C unless there is a novation agreement present between the three parties. Nowadays, employers tend to appoint consultants before appointing design and build contractor. It is to be stated that the consultants are novated to the design and building contractor. The consultant accepts full responsibility of the design including responsibility of design which was carried ou t by the consultant before his appointment. Issues arising under novation agreement The first issue arising under novation agreements is the identification of the terms of the agreement that is to be novated. It is to be said that the obligations under the original agreement can only be novated. The second issue is the identification of the liability of the consultant. While assessing the obligation of the consultant in the pre novation period, it is to be considered that the consultant owed a duty to the employer only and not the contractor as the contractor was not present at the time of his appointment. The third issue is identification of the problems which in turn give rise to conflict of interests. It can be said that the consultant may find himself in a situation of conflict of interest. The conflict of interest of the consultant can be assumed to be relating to the performance of the duties yet. Terms to be incorporated in novation agreements to strengthen the position of the contractor It is to be stated that most of the practitioners still are of the opinion that novation is a very important mechanism prevalent in this construction industry. However, in order to ensure that the novation agreement succeeds in implementation both contractors and employers must avoid uncertainties in the terms of such agreement as held in the Blyth Blyth case. The instances when a consultant will be held liable for loss suffered by the contractor must be clearly mentioned. Typically novation agreements should contain the following: Date of the novation to take place Form of novation agreement to entered into by parties Timeframe of execution Identifying the third party to the agreement. In the case Blyth Blyth Limited v CarillionConstruction Ltd[2] the issues related to novation agreements have been discussed elaborately. It is to be mentioned that in this case an agreement of novation purported to place the responsibilities of contractor for the services performed before the novation agreement on the consultant. However, the consultant started proceeding against the contractor for non-payment of fees. The contractor responded to the charges pressed by the consultant with a counter claim of charging the consultant for breach of terms of contract that supposedly occurred before the novation agreement. The defendant, Carillion argued that the consultant failed to perform the duties owed to the employer which was responsible for Carillions tender being too low. It was decided by the court that the contractor was eligible to bring proceedings against consultant as the consultant did knot owe any duty to the contractor and the contractor did not suffer for which the con sultant could be held responsible[3]. It is to be stated that this decision of the court had left contractors in a difficult position. The contractors have the liability of the work of the designers without the recourse of the designers who are responsible for the preparation of the design. It is to be stated that this problem can be mitigated in the designer acknowledges that such designer had known that the contractor would rely upon the design for preparing the tender prices. However, this would expose the consultant. Therefore it can be stated that after considering the facts of the Blyth and Blyth case, that parties to a novation agreement must ensure to list all the services to be inserted. The parties must also exclude all those services which cannot be regarded to have been performed for the contractor during the prenovation period. It is to be stated that novation agreements apparently benefit both contractor and employer provided the terms of such agreement is properly drafted. Reference List: BlythBlythLtdvCarillionConstructionLtd(2001) 79 Con. L.R. 142 Marinescu, Ioan Lucian. "STUDY ON THE OBJECTIVE NOVATION OF AN OBLIGATION."Challenges of the Knowledge Society(2017): 247-253. Mooney, Conor Francis Joseph. "The removal of the consideration requirement, and the consequent clarification on duress, for verbal modifications to Irish construction contracts." (2015). Marinescu, Ioan Lucian. "STUDY ON THE OBJECTIVE NOVATION OF AN OBLIGATION."Challenges of the Knowledge Society(2017): 247-253. (2001) 79 Con. L.R. 142 Mooney, Conor Francis Joseph. "The removal of the consideration requirement, and the consequent clarification on duress, for verbal modifications to Irish construction contracts." (2015).