assignment in construction contracts

Assignment in construction

Assignment is the transfer of a right or an interest vested in one party (the ‘assignor’) to another party (the ‘assignee’). A valid assignment will entitle the assignee to demand performance of a contractual obligation. Only rights (the ‘benefit’ of a contract) can be transferred by assignment—the parties will need to enter into a novation agreement if obligations under the contract (the ‘burdens’) are intended to be transferred.

Assignments often arise in the context of a construction project where a party to a construction contract, collateral warranty or consultant's appointment wants to assign the benefit under that contract to a third party, such as a purchaser or tenant of a building. Banks and other funders will also frequently take an assignment of the benefit of a suite of construction documents in respect of a development, as an additional part of the security package for their loan to finance the development. A bank will want to acquire the benefit of such documents, in order to be able to assume the position of the employer

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