Novation Agreement (Construction) Template for Philippines

The Novation Agreement (Construction) is a crucial document used in the Philippines when there is a need to substitute the original contractor with a new contractor in an ongoing construction project. This situation may arise due to various circumstances such as contractor insolvency, corporate restructuring, or strategic business decisions. The agreement, governed by Philippine law including the Civil Code and construction industry regulations, ensures a smooth transition by comprehensively addressing the transfer of rights, obligations, and liabilities. It covers essential aspects such as outstanding works, warranties, payment arrangements, and security bonds, while protecting all parties' interests. The document is particularly important in maintaining project continuity while managing legal and practical risks associated with contractor substitution.

1. Parties: Identifies the Original Contractor (Transferor), Employer, and New Contractor (Transferee)

2. Background: Recitals explaining the original construction contract, reason for novation, and confirmation that the Employer has agreed to the transfer

3. Definitions: Defines key terms including Original Contract, Novation Date, Outstanding Works, etc.

4. Interpretation: Rules for interpreting the agreement including references to legislation, time, and currency

5. Transfer of Rights and Obligations: Core novation provisions transferring rights and obligations from Original Contractor to New Contractor

6. Release and Discharge: Release of Original Contractor from future obligations and Employer's acknowledgment

7. New Contractor's Undertakings: New Contractor's commitments to perform Outstanding Works and assume responsibilities

8. Original Contractor's Warranties: Warranties regarding work completed, materials on site, and outstanding liabilities

9. Payment Provisions: Handling of payments, retention monies, and financial matters between all parties

10. Securities and Guarantees: Treatment of existing bonds, guarantees, and warranty obligations

11. Governing Law and Jurisdiction: Confirms Philippine law governance and jurisdiction for disputes

12. Execution: Signature blocks and execution formalities