Novation, delegation and assignation

SRB Civil Engineering UK Ltd v Ramboll UK Ltd [2022] CSOH 93

In SRB Civil Engineering UK Ltd v Ramboll UK Ltd [2022] CSOH 93, Lord Ericht held that the effect of a Novation Agreement, as a matter of Scots law, was to extinguish the rights and obligations of the parties to the original contract (A and B) and to substitute new rights and obligations as between the parties to the novated agreement (B and C). This form of novation in Scots law is called delegation under which the new party, C, takes over the obligations of one of the original parties, A, and becomes obliged in that party's place. On this basis, the obligations and liabilities of A do not simply vanish. Rather, they are replaced by the obligations assumed by C who may then incur liability towards B as if it had been an original party to the agreement. Given that C had assumed the obligations of A and so remained liable to B, it was held that C was not barred by the Novation Agreement from bringing a claim in damages against the defender under a contract which had been concluded between A and the defender and which concerned the same construction project. C was held to be entitled to sue the defender for damages on the basis that A had assigned to C its rights against the defender so that C as assignee was entitled to bring a claim for damages against the defender and the claim was not defeated by the defender's submission that the loss in respect of which C was bringing the claim had been extinguished by the Novation Agreement.