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Novation Agreement (Construction) for Saudi Arabia

Novation Agreement (Construction) Template for Saudi Arabia

This document facilitates the transfer of rights and obligations under a construction contract from one contractor to another in Saudi Arabia. It ensures compliance with Saudi law, including Sharia Law principles, and addresses key aspects such as outstanding works, payments, warranties, and liabilities. The agreement carefully documents the transition process, including the handover of project documentation, permits, and certificates, while maintaining continuity of construction operations. It includes provisions for managing existing relationships with subcontractors, suppliers, and other stakeholders, all within the framework of Saudi Arabian construction regulations and legal requirements.

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What is a Novation Agreement (Construction)?

The Novation Agreement (Construction) is a crucial document used in Saudi Arabian construction projects when there is a need to substitute the original contractor with a new one while keeping the original construction contract intact. This situation may arise due to various circumstances such as contractor insolvency, strategic restructuring, or project optimization requirements. The agreement must comply with Saudi Arabian law, including Sharia Law principles and construction regulations, making it essential to carefully document the transfer of rights, obligations, and liabilities. It typically includes detailed provisions for project handover, outstanding works, payment arrangements, and warranty obligations. The document is particularly important in ensuring project continuity while managing legal and practical risks associated with contractor substitution in the Saudi construction sector.

What sections should be included in a Novation Agreement (Construction)?

1. Parties: Identification of the Original Contractor (Transferor), the New Contractor (Transferee), and the Employer/Client

2. Background: Details of the original construction contract, reason for novation, and current status of the works

3. Definitions and Interpretation: Definitions of key terms and interpretation rules, including references to Sharia Law principles

4. Novation: Core provisions effecting the transfer of rights and obligations from Original Contractor to New Contractor

5. Effective Date: Specification of when the novation takes effect and any conditions precedent

6. Release and Assumption of Obligations: Release of Original Contractor and assumption of obligations by New Contractor

7. Outstanding Payments: Treatment of payments due, retentions, and security bonds

8. Warranties and Representations: Warranties regarding works completed, capacity to contract, and compliance with Saudi law

9. Construction Documents: Transfer of project documentation, permits, and certificates

10. Liability Provisions: Allocation of liabilities for pre and post-novation works

11. Insurance: Requirements for maintaining and transferring insurance coverage

12. Governing Law and Jurisdiction: Confirmation of Saudi law governance and dispute resolution mechanisms

What sections are optional to include in a Novation Agreement (Construction)?

1. Step-in Rights: Optional provisions for Employer's step-in rights, used in high-value or critical infrastructure projects

2. Third Party Consents: Section addressing necessary third-party approvals, used when subcontractors or other stakeholders' consent is required

3. Performance Security: Provisions for new performance bonds or guarantees, included when required by project value or complexity

4. Intellectual Property: Transfer of IP rights, included when design or technical solutions are part of the contracted works

5. Confidentiality: Provisions for maintaining confidentiality, used in sensitive or high-value projects

6. Government Approvals: Section addressing required governmental approvals, included when project involves public sector or regulated activities

What schedules should be included in a Novation Agreement (Construction)?

1. Schedule 1 - Original Contract: Copy or details of the original construction contract being novated

2. Schedule 2 - Project Status Report: Detailed report on the current status of construction works

3. Schedule 3 - Outstanding Works: List and description of remaining works to be completed

4. Schedule 4 - Payment Schedule: Details of outstanding payments, retention amounts, and payment terms

5. Schedule 5 - Transferred Documentation: List of all project documents, permits, and certificates being transferred

6. Schedule 6 - Warranties and Guarantees: List of existing warranties and guarantees being transferred

7. Schedule 7 - Construction Program: Updated construction program showing remaining works and timelines

8. Schedule 8 - Subcontracts: List of existing subcontracts and their status

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Saudi Arabia

Publisher

Ƶ

Document Type

Project Agreement

Cost

Free to use
Relevant legal definitions



















































Clauses





































Relevant Industries

Construction

Infrastructure

Real Estate Development

Energy

Industrial Development

Healthcare Construction

Education Construction

Commercial Development

Residential Development

Government Infrastructure

Transportation

Mining

Oil & Gas

Relevant Teams

Legal

Construction

Commercial

Procurement

Project Management

Risk & Compliance

Operations

Finance

Technical Services

Quality Assurance

Relevant Roles

Construction Manager

Project Director

Legal Counsel

Contract Manager

Commercial Manager

Project Manager

Chief Legal Officer

Construction Director

Procurement Manager

Risk Manager

Quality Assurance Manager

Technical Director

Operations Manager

Chief Executive Officer

Finance Director

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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