CIC publishes Novation Agreement – Switch and related collateral warranty

The Construction Industry Council (CIC) has announced the publication of the remaining novation agreement and related collateral warranty:

• Novation Agreement – Switch (second edition)
• Collateral Warranty Consultant – Employer: Switch (first edition)

These industry-standard documents, which may be used by consultants of any discipline, balance the interests of clients and consultants to ensure they are acceptable to all parties, thereby completing the CIC standard form novation agreements and collateral warranties which were updated in 2019 (see this note for our comments on the other documents in the suite).

The Novation Agreement – Switch is a much needed update to the CIC Novation Agreement published in 2004. It is for use where the appointment of a consultant is to be novated from a client to a design and build contractor or other organisation on a “switch” basis (i.e. the contractor appointment applies only from the date of the novation, rather than on an ‘ab initio’ basis, where the appointment is deemed to be with the contractor ‘from the outset’). Beale & Co were part of the drafting team for this important new document.

The Collateral Warranty Consultant – Employer: Switch is for use with the Novation Agreement – Switch where a warranty is to be given by the consultant to the design and build contractor’s employer in respect of the services performed after novation.

The Changes

Whilst the form of the Novation Agreement follows the same structure as the 2004 first edition, there have been some significant changes, especially in clause 4.

Where Clause 4(a), in the first edition, the Consultant provided a warranty to the Contractor, in the second edition the Consultant provides only a confirmation that the Consultant has performed all obligations in accordance with the terms of the Appointment on the basis that the Consultant was acting for the Client and taking into account the interests of the Client. This reduces the risks of liability arising as a result of the Client and Contractor’s interests being different or even conflicting.

In addition, a net contribution clause has now been included at Clause 4(c) to reduce the Consultant’s liability to the proportion of losses caused. This is further helpful drafting and may provide support for continuing to request net contribution clauses (which are often resisted by Clients).

Comment

This is a positive development for the industry with the traditional CIC “Switch” form of Novation Agreement updated and a form of collateral warranty published that works alongside it. These agreements and the other updated novation agreements and collateral warranties published in 2020 provide a reasonable option for consultants to suggest when novation or collateral warranties are requested.