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Homework Question - Novation Strategy for Internship?

Discussion in 'Australian Law School Homework Questions' started by procrastinasian, 13 July 2016.

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  1. procrastinasian

    procrastinasian Well-Known Member

    31 October 2014
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    Hi, this is not so much a school question as it is just random practical application in my internship.

    When we covered novation in law school, it was very brief and it was not examined when I did contracts. My basic understanding is that a novation is just essentially a change in parties to a contract along with the associated obligations and rights.

    This is different from assignment where in assignment, you are only assigning rights.

    In my internship, I am dealing with construction contracts and when our contract for consultancy with the project management company is novated over to the builder, I am surprised that an entirely new consultancy contract is provided by the builder for us to sign.

    Once we sign a novation deed as requested by the Principal, I thought that the incoming party now adopts the terms of our previous contract instead of creating a whole new one. If this were the case, why do we not just terminate the old contract and start over?

    Further, I assume that the strategy for novation is meant to simplify the contractual process if parties were to change, but I have learned to be careful of novation deeds where continuing obligations to the Principal are still in the contract despite the fact that the Principal is being released from the contract. What other "red flags" in novation should I be looking out for?

    Any insight would be greatly appreciated.

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