NEC contracts—compensation event regime

The following Construction practice note provides comprehensive and up to date legal information covering:

  • NEC contracts—compensation event regime
  • Key features
  • Notification and quotation
  • Interaction with early warning procedure
  • Time bar
  • Assessment of compensation events
  • Prices
  • Completion Date
  • Other considerations

NEC contracts—compensation event regime

This Practice Note considers compensation events in the NEC3 and NEC4 contracts, the occurrence of which may entitle the Contractor to additional time and/or money. It looks specifically at the NEC3/NEC4 Engineering and Construction Contract (ECC), but similar provisions are found across the suite.

Key features

The compensation event regime in the NEC contracts is contained in section 6 of the core clauses. Key features include:

  1. there is a single procedure dealing with the Contractor’s claims for additional time and money, with a single list of qualifying events. This can be contrasted with the position in the JCT contracts, in which events entitling the Contractor to additional time (‘Relevant Events’) and money (‘Relevant Matters’) are dealt with separately

  2. in NEC4, the list of compensation events can be supplemented by adding additional events into part one of the Contract Data (in NEC3, it was necessary for the parties to use a Z clause to achieve this). Secondary Option X2 also provides for an additional compensation event, for change in law, if selected

  3. the Contractor must give notice of a compensation event within the specified period, failing which it may lose its entitlement to any additional time or money

  4. failure by the Contractor to give an early warning may restrict its entitlement to additional time or money

  5. the contracts take a prospective approach to the

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