Generally have to say yes, although they do have similarities.
Far too many differences too try and explain in detail but is assignment a form of sub contracting, or sub contracting a form of assignment, or neither, would be an interesting legal debate.
Member for
19 years 10 months
Member for19 years10 months
Submitted by Norzul Ibrahim on Sat, 2006-02-18 08:33
Both are used used alot in construction. Both have their place and if done correctly then theres no problems and as you state, often good reason for doing so.
It is oftenly mistakenly thought that "weve assigned you this part of the contract and therefore it is ALL your responsibility". Unfortunately later a defect or similar appears and the original party finds out that they are under an obligation with regards the defect and still liable for damages.
Or they tried to assign the obligations as well only to find out later when theres a problem, that you can drive a coach and horses through the agreement.
Like everything else, each have there place and if used correctly, both can be very useful.
Member for
19 years 10 months
Member for19 years10 months
Submitted by Norzul Ibrahim on Wed, 2006-02-01 01:04
Assignment is when you "assign" a right or rights to another party. ie, I have this right(s)and Im going to give it to another party so that they may get the benefit of it. You can not assign a greater right than you have yourself and it must not be dependant on the person. eg A lets B walk across his land. B could not assign that right to C if Bs right is personal only to him, ie A agrees B can do it, but would object to C, D, E, etc walking across his land. Therefore, assignment in the contractual sense is the assignment of ones parties rights under the contract to another party - usually agreement of all parties is required. However and most importantly, the obligations of the party assigning the right under the contract is not assigned unless agreed. ie the party receiving the right can do whatever that right allows, but will be free from the obligations arising from it - eg time of completion.
IT IS NOT TO BE CONFUSED WITH NOVATION, which is similar but crucially different.
Novation is the substituting one party to a contract with a new party. New conditions can be negotiated by the parties before the novation takes place and the novation forms a new contract. Most importantly, it is not just rights that are assigned but also the original parties obligations.
eg A + B are in contract and the parties agree that B should be replaced by C. C is novated to the contract which now becomes new a contract between A + C.
Often novation is used in ECP contracts where a design company has undertaken a preliminiary design work for the Employer and the Contractor wants to employ that same company to continue the design work.
E = Employer, D= Designer, C= Contractor
Original contract for design between E + D. ECP contract is let to C.
As C now is the Contractor and Designer, D is novated to C from E, to replace C as Designer, usually on very similar terms to the original contract E & D had. A new contract now exitsts between C & D but as stated above, D also takes on the obligations under the contract of C.
Assignment is often mistakenly used where Novation should be and then the original company who thought they had rid themselves of all their obligations under the contract find out they havent.
Ill try to share with yu. But what do yu want to know?
First, my project is about the cogeneration or power plant kind of project...not really the construction of building. However, we do have also the construction of sub-station and control building.
"Provivional Acceptance" should be Provisional Acceptance (PA). The PA will be achieved upon successfull completion of the performance test of the facilities. Once granted the PA then the one year warranty period will start. The end date of the warranty period is known as Final Acceptance (FA). These PA and FA are normally tied to the payment milestone...each constitute 5% of TCP.
Member for
19 years 10 months
Member for19 years10 months
Submitted by Norzul Ibrahim on Sun, 2006-01-15 13:30
Let us first discuss on the liquidated damages. As an example, the total aggregate amount of liquidated damages for late delivery shall not exceed 10% of CONTRACT PRICE (CP). For the sake of our discussion, assume the followings:
1) GTG Package : USD 80 million (by eqpt supplier); DDU date : 15 Feb 2006
2) STG Package : USD 20 million (by eqpt supplier); DDU date : 01 Mac 2006
3) BOP Package : USD 100 million (by EPCC Contractor)
4) TOTAL CONTRACT PRICE (TCP) : USD 200 million; Provivional Acceptance Date : 15 Feb 2007
For the equipment, the LD will normally be trigerred after the DDU date, 0.2% of CP upto 10% of CP
For the EPCC, the LD will normally be trigerred after PA date, 0.2% of TCP upto 10% of TCP.
Once we novate the eqpt to EPCC, all our rights will be transfered to the EPCC Contractor. They will manage the technical as well as the commercial.
Why are we doing this? To limit the potential risks exposed to Owner.
Is this kind of contracting strategy common to yu guys? What possible problems that yu foresee from this arrangement? So far weve not experienced any problem yet bcoz the equipment is not delivered to site yet.
Thanks
norzul
Member for
22 years 4 months
Member for22 years4 months
Submitted by Shahzad Munawar on Sun, 2006-01-15 12:44
Im currently involve with the cogeneration project. Initially we split the project into 3 contracts :
1) Balance of Plant (BOP)
2) Gas Turbine Generator (GTG) Package
3) Steam Turbine Generator (STG) Package
We awarded GTG & STG and about 2 months after that we assigned the entire contract to the EPCC Contractor who will be responsible for the entire project. This is what i call novation contract...
Member for
20 years 10 monthsRE: Novation Contract
Norzul,
Generally have to say yes, although they do have similarities.
Far too many differences too try and explain in detail but is assignment a form of sub contracting, or sub contracting a form of assignment, or neither, would be an interesting legal debate.
Member for
19 years 10 monthsRE: Novation Contract
Dear Andrew,
Is there any different between "assignment" and subcontracting?
Thanks
norzul
Member for
20 years 10 monthsRE: Novation Contract
Norzul,
Both are used used alot in construction. Both have their place and if done correctly then theres no problems and as you state, often good reason for doing so.
It is oftenly mistakenly thought that "weve assigned you this part of the contract and therefore it is ALL your responsibility". Unfortunately later a defect or similar appears and the original party finds out that they are under an obligation with regards the defect and still liable for damages.
Or they tried to assign the obligations as well only to find out later when theres a problem, that you can drive a coach and horses through the agreement.
Like everything else, each have there place and if used correctly, both can be very useful.
Member for
19 years 10 monthsRE: Novation Contract
Andrew,
I totally agree with your explanation on the "novation" and the "assignment". True...its very easy to be confused of these 2 types of contract.
However, the mains reason why we had implemented this kind of contract are:
1) To expedite the schedule i.e. by breaking the contract into several packages (balance of plant + long lead equipment).
2) To minimize the project risks by novating the long lead equipment contract to the overall EPCC contract.
Thanks
norzul
Member for
20 years 10 monthsRE: Novation Contract
All,
Assignment and Novation are two different things.
Assignment is when you "assign" a right or rights to another party. ie, I have this right(s)and Im going to give it to another party so that they may get the benefit of it. You can not assign a greater right than you have yourself and it must not be dependant on the person. eg A lets B walk across his land. B could not assign that right to C if Bs right is personal only to him, ie A agrees B can do it, but would object to C, D, E, etc walking across his land. Therefore, assignment in the contractual sense is the assignment of ones parties rights under the contract to another party - usually agreement of all parties is required. However and most importantly, the obligations of the party assigning the right under the contract is not assigned unless agreed. ie the party receiving the right can do whatever that right allows, but will be free from the obligations arising from it - eg time of completion.
IT IS NOT TO BE CONFUSED WITH NOVATION, which is similar but crucially different.
Novation is the substituting one party to a contract with a new party. New conditions can be negotiated by the parties before the novation takes place and the novation forms a new contract. Most importantly, it is not just rights that are assigned but also the original parties obligations.
eg A + B are in contract and the parties agree that B should be replaced by C. C is novated to the contract which now becomes new a contract between A + C.
Often novation is used in ECP contracts where a design company has undertaken a preliminiary design work for the Employer and the Contractor wants to employ that same company to continue the design work.
E = Employer, D= Designer, C= Contractor
Original contract for design between E + D. ECP contract is let to C.
As C now is the Contractor and Designer, D is novated to C from E, to replace C as Designer, usually on very similar terms to the original contract E & D had. A new contract now exitsts between C & D but as stated above, D also takes on the obligations under the contract of C.
Assignment is often mistakenly used where Novation should be and then the original company who thought they had rid themselves of all their obligations under the contract find out they havent.
Member for
19 years 10 monthsRE: Novation Contract
Hi Norzul,
I just want to know that, is the NOVATION CONTRACT is a work package or a TYPE OF CONTRACT?
and if it is a type of contract, then i would like to get more information in that regard.
Cheers & Regards,
Rahul Shamrao Mulik
NMX LLC Dubai
Member for
19 years 10 monthsRE: Novation Contract
Hi Rahul,
Ill try to share with yu. But what do yu want to know?
First, my project is about the cogeneration or power plant kind of project...not really the construction of building. However, we do have also the construction of sub-station and control building.
Thanks
norzul
Member for
19 years 10 monthsRE: Novation Contract
Hi,
I am new to the NOVATION CONTRACT type, being in Building Construction Line, I have had never been exposed to such kind of contract arrangement.
I will be gratefull to you, if you help me out.
Cheers & Regards,
Rahul Shamrao Mulik.
Member for
19 years 10 monthsRE: Novation Contract
Hi Guys,
Do yu foresee any problem with this kind of contract?
Thanks
norzul
Member for
19 years 10 monthsRE: Novation Contract
"Provivional Acceptance" should be Provisional Acceptance (PA). The PA will be achieved upon successfull completion of the performance test of the facilities. Once granted the PA then the one year warranty period will start. The end date of the warranty period is known as Final Acceptance (FA). These PA and FA are normally tied to the payment milestone...each constitute 5% of TCP.
Member for
19 years 10 monthsRE: Novation Contract
Dear Shahzad,
Let us first discuss on the liquidated damages. As an example, the total aggregate amount of liquidated damages for late delivery shall not exceed 10% of CONTRACT PRICE (CP). For the sake of our discussion, assume the followings:
1) GTG Package : USD 80 million (by eqpt supplier); DDU date : 15 Feb 2006
2) STG Package : USD 20 million (by eqpt supplier); DDU date : 01 Mac 2006
3) BOP Package : USD 100 million (by EPCC Contractor)
4) TOTAL CONTRACT PRICE (TCP) : USD 200 million; Provivional Acceptance Date : 15 Feb 2007
For the equipment, the LD will normally be trigerred after the DDU date, 0.2% of CP upto 10% of CP
For the EPCC, the LD will normally be trigerred after PA date, 0.2% of TCP upto 10% of TCP.
Once we novate the eqpt to EPCC, all our rights will be transfered to the EPCC Contractor. They will manage the technical as well as the commercial.
Why are we doing this? To limit the potential risks exposed to Owner.
Is this kind of contracting strategy common to yu guys? What possible problems that yu foresee from this arrangement? So far weve not experienced any problem yet bcoz the equipment is not delivered to site yet.
Thanks
norzul
Member for
22 years 4 monthsRE: Novation Contract
Which clauses of such Contract you are more interested so that these may be discussed
Member for
19 years 10 monthsRE: Novation Contract
Im currently involve with the cogeneration project. Initially we split the project into 3 contracts :
1) Balance of Plant (BOP)
2) Gas Turbine Generator (GTG) Package
3) Steam Turbine Generator (STG) Package
We awarded GTG & STG and about 2 months after that we assigned the entire contract to the EPCC Contractor who will be responsible for the entire project. This is what i call novation contract...