Chapter 1 Early works contract

An early works contract governs the preliminary works carried out prior to the finalisation of a head contract, under which the main works are carried out.

The head contract may specifically oblige the contractor to accept liabilities for the preliminary works, even where the preliminary works are undertaken by a different contractor. Alternatively, the head contract may allow assignment or novation of the early works contract.

Contractual rights that constitute a chose in action (ie rights enforceable by a court) can be assigned without the consent of the other contracting party, unless the right is of a personal nature or where assignment is expressly prohibited by the contract. A right may be personal if the identity of the party assigning the right (the assignor) is fundamental to the contractual relationship (Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd [2006] 230 ALR 56). The party receiving the assigned right (the assignee) is subject to any defences that the other party may have had against the assignor. Statutory procedures for the assignment of a chose in action exist in every state to enable the assignee to sue in its own name without needing to join the assignor to the action (eg section 199 of the Property Law Act 1974 (Qld), section 12 of the Conveyancing Act 1919 (NSW), section 134 of the Property Law Act 1958 (Vic) and section 20 of the Property Law Act 1969 (WA)).

Contractual obligations, in contrast to rights, cannot be assigned without the consent of the other contracting party, which is generally done by novation. Novation involves the substitution of parties in an existing contract, or the substitution of an existing contract with a new contract (extinguishing the prior contract). A novation may be express or implied, but requires consent between the incoming, outgoing and remaining parties.

Where novation is done by the substitution of an existing contract with a new contract, the new contract can be between the same parties or between different parties. The consideration for the new contract is the discharge of the old contract.

The novation requires:

  • the new contract to extinguish the prior contract, therefore discharging the outgoing party’s obligations; and
  • the new contract between the incoming party and the remaining party to be on substantially the same terms as the prior contract.
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