32.3.1 The Contract should generally not allow the Authority to assign or transfer its rights or obligations under the Contract without the consent of the Contractor.
32.3.2 The main exceptions to the above are where transfer either takes place under statute or is required to facilitate a public sector reorganisation. Specific exceptions may also have to be provided for in a particular project if a transfer is anticipated (e.g. the London Underground project which was, under statute, transferred to Transport for London) or particular sectors (e.g. the local authority sector where transfers may be required due to boundary changes). Authorities should recognise that financiers will be concerned to ensure that any transferee's covenant is as strong as that of the original Authority and that the transfer could not prejudice their security. If this is not the case, appropriate credit enhancement (e.g. in the form of a guarantee) may be required so that the Contractor's position is not prejudiced. Where such a right is required by the Authority, drafting for both central and non-central government projects is set out below.
Required drafting is as follows:
32.3 Restrictions on Transfer of the Contract by the Authority in Central Government Projects
(a) The rights and obligations of the Authority under this Contract shall not be assigned, novated or otherwise transferred (whether by virtue of any Legislation or any scheme pursuant to any Legislation or otherwise) to any person other than to any public body (being a single entity) [acquiring the whole of the Contract and] having the legal capacity, power and authority to become a party to and to perform the obligations of the Authority under this Contract being:
(i) a Minister of the Crown pursuant to an Order under the Ministers of the Crown Act 1975; or
(ii) any other public body whose obligations under this Contract are unconditionally and irrevocably guaranteed (in a form reasonably acceptable to the Contractor) by the Authority or a Minister of the Crown having the legal capacity, power and authority to perform the obligations under the guarantee and the obligations of the Authority under this Contract.
32.3 Restrictions on Transfer of the Contract by the Authority in Non-Central Government Projects
(b) The rights and obligations of the Authority under this Contract shall not be assigned, novated or otherwise transferred (whether by virtue of any Legislation or any scheme pursuant to any Legislation or otherwise) to any person other than to any public body (being a single entity) [acquiring the whole of the Contract and] having the legal capacity, power and authority to become a party to and to perform the obligations of the Authority under this Contract being:
(i) a Minister of the Crown pursuant to an Order under the Ministers of the Crown Act 1975;
(ii) any [local authority] which has sufficient financial standing or financial resources to perform the obligations of the Authority under this [Contract1];2 or
(iii) any other public body whose obligations under this Contract are unconditionally and irrevocably guaranteed (in a form reasonably acceptable to the Contractor) by the Authority or a Minister of the Crown having the legal capacity, power and authority to perform the obligations under the guarantee and the obligations of the Authority under this Contract.
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1 This should also include any other Project Documents that the Authority is a party to (e.g. any funders' direct agreements or leases).
2 This Sub-Clause will only be applicable in non-central government projects. A transfer pursuant to this Sub-Clause should only be to an authority with the same status as the procuring authority. For example, on a local authority Project, the transfer must be to a local authority.