Search

How can we help?

Icon

NEC publishes new amendments to NEC4 suite

The NEC has published a second set of amendments to its NEC4 suite of contracts, reflecting user feedback from the industry and recent legal development.  The October 2020 amendments can be found on the NEC site.

Key amendments to NEC4 contracts

1. Delay damages

In all NEC4 contracts that contain an option for delay damages there have been amendments to clarify that the client’s entitlement to be paid delay damages will cease at termination. After termination, any further delay costs will form part of the general costs/damages due as a result of the termination of the contractor’s/consultant’s obligation to provide the goods, works or services.

This amendment has been included following last year’s Court of Appeal decision in Triple Point Technology Inc v PTT Public Company Limited. In this case, a liquidated damages provision had no application when a contractor did not complete its works. This meant that any accrued liquidated damages up until the date of termination were no longer payable and the employer was only entitled to claim general damages (damages which require proof of the losses claimed) for the delay.

2. Contractor’s/Sub-Contractor’s liabilities and use of equipment, plant and materials

In the Term Service Contract, Term Service Sub-contract and Design Build Operate Contract clause 81.1 has been amended to clarify that the contractor / sub-contractor is liable for loss of or damage to any equipment provided to it by the client / contractor.

In contracts which set out the contractor’s rights to use equipment, plant and materials and other materials provided by the client, NEC has simplified the provisions in clause 7.

3. Early contractor involvement

Secondary Option X22, an option which applies to the Engineering and Construction Contract and the Alliance Contract, has been amended to provide greater flexibility in the development of a project in stage one and also to provide a more structured process for the contractor’s submissions and the notice to proceed to stage two (as described in the Scope).

The project manager and the contractor now have an obligation to agree any changes to the access dates, key dates and the completion date, as well as agreeing any necessary changes to the total of the prices.

Key amendments to NEC4 contracts

4. Project bank accounts

Various amendments have been made to all the contracts in the NEC4 suite except the Design Build Operate Contract and Professional Services Short Contract in the Secondary Option Y(UK)1 (Project Bank Account) provisions to reflect electronic banking methods. The main changes are:

  • Choice of account holder – the client can now decide whether the account is held by the contractor or held jointly by the contractor and the client. This enables the client to decide its level of involvement in administering the Project Bank Account, such as establishing and approving payments from the Project Bank Account. The account holder will be identified within the Contract Data.
  • Electronic banking – the procedures have been updated to be more compatible with current electronic banking methods.
  • Payment schedule – which is prepared by the contractor and given to the project manager replaces the authorisation document. The payment schedule lists the payments to be made to the contractor and named suppliers from the project bank account.
  • Project bank account tracker – the contractor is now required to prepare and maintain a project bank account tracker. This records all payments made to and from the Project Bank Account and the date each payment was made. The contractor issues the project bank account tracker to the project manager when payments are made from the project bank account.

Dates for payment

Following, a TCC decision from earlier this year, Secondary Option Y(UK)2 (The Housing Grants, Construction and Regeneration Act 1996) provisions in the NEC4 contracts (including the Professional Service Contract, Term Service Contract and Design, Build and Operate contract) where the final date for payment was linked to receipt of an invoice from the contractor/consultant have now been amended.

In accordance with the Rochford Construction Limited v Kilhan Construction Limited decision, the final date for payment is either a period of seven days after the ‘due date’ or the period stated in the contract/subcontract data and no longer runs from the date of receipt of an invoice by the payer.
The ‘due date’ for payment is now the later of the date of receipt of an invoice by the paying party or fourteen days after the assessment date. These amendments do not change the overall timescales for payments.

In Rochford Construction Limited v Kilhan Construction Limited, it was held that the final date for payment must be a fixed period of time from the due date and cannot be linked to the provision of invoices, which would mean non-compliance with the Housing Grants, Construction and Regeneration Act 1996.

Still using NEC3?

NEC has confirmed that it will no longer provide updates for the NEC3 suite of contracts. If you are still using the NEC3 standard forms, you should consider incorporating similar amendments to ensure your contracts reflect best practice and recent legal developments.

About this article

About this article

Read, listen and watch our latest insights

art
  • 18 March 2024
  • Privacy and Data Protection

Consent or pay: Issues and considerations, Meta’s potential breach

The ICO has stated that any organisation considering using “consent or pay” must ensure that the consent to processing of personal data for personalised advertising is being given freely, and is fully informed.

art
  • 14 March 2024
  • Employment

The impact of technology-dependent Gen Z on the workplace – Amanda Glover writes for Business Voice magazine

In Business Voice magazine, Amanda Glover, Associate at Clarkslegal writes about the impact of Gen Z sharing details of their work woes on social media and how organisations should respond.

art
  • 13 March 2024
  • Privacy and Data Protection

21 March 2024 Deadline: Are your international data transfer agreements compliant?

If your organisation transfers personal data from the UK to another country, it needs to comply with statutory requirements to ensure adequate levels of protection for that data are in place.

art
  • 08 March 2024
  • Employment

The Labour Party proposes extensions to discrimination law

With a general election to come in 2024, it is vital that employers keep up to speed with the proposals of both major parties that are likely to affect the day-to-day operation of their business. 

art
  • 07 March 2024
  • Litigation and dispute resolution

What to expect from 2024 in Dispute Resolution

Now that two months of the year have passed, what changes might be expected in Dispute Resolution during the remainder of 2024?

art
  • 06 March 2024
  • Privacy and Data Protection

Personal Data Breaches – How do I deal with them?

This article will provide an overview of the steps to take when experiencing a personal data breach.