Anyone working in construction is likely to have encountered the terms “assignment” and “novation”. An assignment is a transfer of an interest from one party to another. So, for example, if A enters into a contract with B, A may generally assign the benefit (but not the burden) of that contract to C. In this context, “benefit” and “burden” refer to the two aspects of any contractual relationship. If I offer to build a house for you for £500,000, the benefit of the contract to me is to receive the money. The burden is building the house. For you, the benefit of the contract is receiving the house and the burden is paying me the money. That is a simplistic example but gives the general idea. The other thing to note is that the benefit usually includes both accrued and future contractual rights. It is possible to assign only future or only accrued rights, but clear words are needed to do so.

Novation is also the transfer of an interest from one party to another. Unlike assignment, however, it transfers both the benefit and the burden of a contract. For that reason novation requires the consent of all the parties whereas in the example given above an assignment can be carried out without B’s consent. Again in simplistic terms, novation operates to swap one contract between A and B with another contract between A and C.

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