In a construction industry contract - such as a building contact, professional appointment or collateral warranty - a building contractor, specialist contractor or professional consultant will have contractual obligations such as to carry out works, deliver materials or carry out services - the counterparty employer or beneficiary under such a contract will have the rights to the performance of those contractual obligations.

Nature of contractual rights as assets

These contractual rights can be an asset with value, but they do not have a physical existence (like a car or other physical asset) – the Scottish legal name for a non-physical asset is “incorporeal moveable property”. In Scots law contractual rights can be transferred from one entity to another using a legal process called assignation.

The Moveable Transactions (Scotland) Act 2023

The Moveable Transactions (Scotland) Act 2023 ("the New Act") came into force on 1 April 2025. It makes new law that applies to the assignation of certain kinds of Scots law contractual rights, which will include the assignation of Scots law construction related contractual rights.

Assignation clauses in Scottish construction contracts

Scottish construction related contracts such as building contracts, professional appointments and collateral warranties often contain a clause dealing with the transfer (assignation) of the contractual rights. Such assignation clauses are used in different situations. An example of assignation is where a developer and a building contractor sign a building contract and the developer later transfers (assigns) it’s building contract rights to a person purchasing the developed property. In this example the developer is the “assignor”, the purchaser is the “assignee” and the building contractor is the “debtor".

Construction related contracts - update on assignation of contractual rights

Key elements in the assignation of construction contractual rights

Assignation of construction related contractual rights is mostly arranged in three separate parts

  1. Assignation Clause: a clause in the contract dealing with the transfer of the rights under the contract.
  2. Assignation Document: a document to transfer (assign) the contractual rights from the assignor to the assignee; and
  3. Intimation: a notice to the debtor that the transfer (assignation) has happened.

Under the New Act, in most cases this three-part process will continue to be applied to the assignation of construction related contractual rights.

Benefits

For assigning construction related contractual rights, some benefits of the New Act are:

  1. Assignation “in part” - it provides for assignation “in whole or in part” and defines the circumstances when assignation “in part” can be used (section 5 of the New Act).
  2. Electronic signing: the New Act provides for electronic signing (for example using DocuSign) of the assignation document (sections 1(1) and 120(2)(a) of the New Act) – there will be no need for a hard copy document to be physically circulated and signed using wet ink signatures.
  3. Reduced administration: there will be no need for the notice (intimation) of assignation to be signed and it will be possible to serve it by email (sections 8(3)(c) and 8(5)(c) of the New Act). Also, email service will be deemed to have been received 24 hours after sending unless it is shown to have been received earlier (section 8(10) of the New Act). This could reduce transaction administration when compared to the practice of drafting, printing and sending hard copies by recorded delivery post and following up to obtain signed acknowledgements.
  4. Flexibility: an assignor or an assignee will be able to notify (intimate) the assignation by serving notice on the debtor (section 8(1)(a) of the New Act).
  5. Certainty: generally, the New Act will provide greater certainty on the Scottish law for assigning construction related contractual rights – for example, that an “assignation document” is required (section 1(1) of the New Act).

Points to consider

Some points to consider with assignation of contractual rights:

Implied warranties

The New Act will impose implied warranties on an assignor when it signs an assignation document (section 9 of the New Act) – the type of warranties imposed will depend on whether the assignation is for value or is for free. The assignor and the assignee will be able to exclude these warranties by agreement – by including suitable text in the assignation document.

Implied warranties

Express wording

A person who wants the option to assign construction contract rights “in part” will likely want to include suitable text for this in the relevant construction related contract.

Express wording

Liability for expense

The New Act recognises that an assignation “in part” may cause the debtor additional expense. Therefore, unless the debtor agrees otherwise, the assignor will be liable to the debtor for any expense incurred by the debtor that is attributable to the claim being assigned “in part” rather than “in whole” (section 5(3) of the New Act). An employer, developer or other person wanting to assign "in part" will likely want to exclude liability for such expense - this could be done by having suitable text in the construction related contract.

Liability for expense

Notice of Assignation

The New Act describes the information that must be included in a notice (intimation) of assignation (section 8(3) of the New Act). It does not specify a particular format or form of words.

Notice of Assignation

Method of serving notices of assignation

The New Act describes the methods for serving notices of assignation (sections 8(5) to 8(8) of the New Act). It describes the available options and allows the assignor and debtor to agree the use of one or more of those options. The options are (i) delivery in person to the debtor, (ii) by postal service or equivalent, or (iii) by email.

Method of serving notices of assignation

Service by email

To make sure assignation notices (intimations) can be served by email it will be advisable to agree this in advance by having suitable text in the construction related contract, including an email address.

Service by email

Contact our construction lawyers today for expert guidance on drafting, reviewing, or updating your construction contracts to fully benefit from the Act’s provisions and avoid unnecessary liabilities or administrative hurdles.

Contributor

Craig Bradshaw

Legal Director