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Novation - Retaining CDA Claim


John M

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  • Company A is selling all of its assets to Company B.

  • Novation agreements will be obtained for Government contracts.

  • However, Company A wants to keep a CDA Claim on a contract where performance is completed but still open pending resolution of claims.

  • Can Company A keep this one contract & litigate CDA Claim in its name, and still be eligible to novate all other contracts?

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John M., why not? The general rule is that a company cannot assign a contract. This is based on statute. However, the government can consent to the transfer of a contract if it is in the government's interest to do so. FAR 42.12 provides guidance on determining when it is in the government's interest to consent to the transfer of a contract. Nothing in 42.12, requires a contractor to transfer a contract. In the case you have described, performance on the contract is complete. None of the assets being acquired by B will be used in the performance of that contract. Therefore, I see no reason why contractor A could not retain that contract and continue to pursue its claim. Further, even if the contract and claim is novated, that would not necessarily extinguish the claim and A could still continue to pursue it in B's name.

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What you say makes complete sense. The key is that all (or substantially all) of the assets are being transferred. So, keeping one contract which is remains open due to a claim, but where no work is required, does not prevent novation of other executory contracts. Thank you very much for your thoughts.

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