This clause has been drafted to apply to novation/assignment by the Supplier but does not cover novation/transfer/assignment by the Customer.
The clause provides a mechanism for the novation of the Contract by the Supplier to a third party and applies whether or not the incoming third party supplier will be taking over part or full responsibility of the Contract, as if it has been a party to the Contract since the commencement.
It requires the Supplier to notify the Customer of any proposed novation or assignment and to obtain the Customer’s written consent. The clause allows for the Customer to impose conditions on any consent it provides.
It is important that the Customer receive early warning of any such novation, as it will have an impact on the provision of Goods and/or Services under the Contract.
It also documents the Customers obligation to assess whether the incoming supplier would be likely to diminish value for money achieved under the Contract prior to giving consent.
The clause allows the Customer the discretion to decline consent to the novation. Declining consent will be appropriate if the incoming third party is unlikely to provide the same or greater level of value for money to the Customer.
If the Customer’s assessment finds that the incoming third party is unlikely to represent value for money, the clause also enables the Customer to decline novation and cancel the contract.
The clause has not been drafted to apply to novation/transfer/assignment by the Customer. In the case of Machinery of Government changes it is often the case that the transfer is to another entity which is also part of the Commonwealth ie the same legal entity.
This clause should not be used in relation to a Deed of Standing Offer arrangement or any contract placed under a Deed of Standing Offer.
Novation and Assignment
X.1 The Supplier cannot novate its obligations and agrees not to assign its rights under this Contract without the prior written approval of the Customer. No novation is complete without a formal arrangement to novate or assign, signed by both the Supplier and the Customer.
X.2 The Supplier will promptly provide any details reasonably required by the Customer to enable a complete assessment of the proposed new Supplier’s ability to perform the Contract, which may cover all issues assessed in the original approach to market, including confirming that the Contract’s value for money outcomes will not be diminished by any proposed novation or assignment of any rights or obligations under the Contract prior to giving consent. In giving consent, the Customer may impose any conditions it considers appropriate.
X.3 The Customer reserves the right to decline consent based on its assessment.
X.4 The Customer reserves the right to terminate the Contract as a result of any unapproved action the Supplier may take in relation to novation or assignment.
While use of this clause is optional, it is common for contracts to include a clause of this type.
Standardisation of contractual text results in efficiencies for both Parties to a contract. Before deciding whether a particular clause is appropriate, procurement officials should carefully consider the context of their procurement.
This clause should be considered in the context of other provisions dealing with assignment, variation, termination and warranties.
Otherwise, where this clause is included, the clause wording should be used without change.
Terms that are capitalised may need to be changed to align with the Contract terminology.