ABSTRACT
Novation commonly occurs in the construction industry where a contract between employer and consultant is replaced by a contract between contractor and consultant on identical terms. The employer is one of the parties to the warranty principally to acknowledge agreement to the step in procedure and to agree that the contractor can treat the bank as the employer. A performance bond is a specific kind of bond whose purpose is to provide compensation if the contractor fails to carry out the building contract. Sometimes, the step in procedure is included in warranties given by the architect to a funder, or in warranties given by the architect to the employer where the architect is employed by the contractor in a design and build scenario. In the latter instance, the step in rights may be required by the employer in the event that the contractor goes into liquidation and the employer wishes to complete the building using the contractor's architect.
