Assigning a building contract

Assignment involves the transfer of complicated rights and requires you to be incredibly careful. Once you know what can be assigned, you need to look out for the traps!

Historically, the courts were troubled by cases involving whether or not the assignment was subject to consent (if you failed to get consent then any purported assignment was invalid) or whether the assignee had suffered loss (where the parties were allowed to assign).

Assignment is an integral part of the financing arrangements of a project.

Mailbox v Galliford

In this case, Mailbox terminated the contractor’s employment and decided to adjudicate, and an adjudicator’s award was given in favour of Mailbox. The enforcement of that award came before Mrs Justice Farrell, who ‘produced an extremely clear and lucid judgment on what is a very complex issue’ (according to Paul Darling QC).

The chronology highlights that (1) the original assignment occurred before the building contract was signed (notice was served by assignee on the contractor); (2) The assignee re-assigned its interest back to employer very close to the notice of adjudication (notice was served during the adjudication).

The issues to be decided were:

  1. As the assignment was before building contract, was it effective? Decision: assignments were sufficient to transfer future contracts (a decision that was made easier because notice was given to the contractor).
  2. Was it assignment or charge? Decision: the words were clear and the document was construed as a legal assignment.
  3. Was the re-assignment was effective, because assignment post-dated start of adjudication and notice given too late? Decision: as the re-assignment was executed on day of notice of adjudication, and we don’t distinguish between parts of a day, it was effective. Also decided that notice merely completes the legal assignment and is not essential to the cause of action – notice of the re-assignment is merely a procedural issue to deal with disputes between assignor and assignee.

What should you do?

Don’t assign a contract.

However, if you really must:

  • Check your contract clearly – follow any clause on assignment carefully.
  • Check any document is an assignment not a charge.
  • Check you have complied with contract provisions on assignment and act on the basis that you have complied.
  • Clearly draft your requirement for consent – if your right to assign is limited then get consent.
  • Don’t wing it or you will be creating Mailbox problems for yourself.
  • Ideally assign and give notice of assignment before you give notice of adjudication.

Case: Mailbox (Birmingham) Ltd v Galliford Try Building Ltd [2017] EWHC 1405

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