Frequently Asked Questions

Question
We are a subcontractor under an NEC3 Engineering and Construction Subcontract (ECS) option A (priced
contract with activity schedule) incorporating option W1. Option Y(UK)2 is not relevant to our contract
and we have not incorporated it. We consider the contractor is obliged to assess the amount due at the
assessment date, certify a payment within 2 weeks of the assessment date and pay the amount due within
one month of the assessment date. In addition to other defaults and failures of the contractor, we are not being paid and we consider that we are owed substantial sums by the contractor, although in our opinion this does not meet the threshold for breach enabling termination under section 9.

While section 5 cites interest as payable, is this the only remedy available for late payment? The breach is such that we are unable to provide the subcontract works. We have notified a breach of the subcontract under clause 60.1(18), although if interest is provided for, we do not really see that this is a valid compensation event. Is interest all that the ECS contemplated in these circumstances and, if non-payment is a valid breach under 60.1(18), can we assess the effect as more than the restitution already provided (i.e. interest)?
We agree with your assessment that the primary contractual remedy is interest until the correct amount is paid and, given the definition of defined cost, clause 60.1(18) is not much help to you. But that is not the only remedy in the contract if the parties get into a dispute about anything. The whole point of having an adjudicator in NEC contracts is to provide a truly independent person waiting in the wings to make a temporarily binding decision on disputes rather than allowing them to fester. Once an adjudicator makes their decision, the parties are contractually obliged to put it into effect, whether they agree with it or not (see clause W1.3(10)). If either party does not agree with the decision, they have a limited time to say so, see clauses W1.3(10) and W1.4(2) and, if they meet that timescale, they can then refer it to a tribunal sometime in the future. But in the meantime, both parties have to abide by the decision. So, if for example, an adjudicator’s decision is that the assessment of a compensation event is £x, the contractor is contractually bound to pay you £x for that compensation event unless and until a tribunal decides, or the parties agree, otherwise. In addition, W1 also requires that any dispute must be dealt with in this way within a stated timescale and, if it is not, neither party can refer it to either an adjudicator or a tribunal, see clause W1.3(2).

Those timescales are set out in the adjudication table in clause W1.3(1). This can be problematic. If, for example, the contractor has stated that a notified compensation event is not a compensation event for a reason in the contract, and you have not referred that action within the timescales in the adjudication table, you may well have lost your right to dispute it. The same goes for decisions the contractor has made about the value of a compensation event. But, if all they have done is stonewalled and not made a decision at all, you are probably in a better position to overcome the time-limit problem.

Please note we can only offer contractual advice and not give you legal advice. The line between them is often blurred, which is why we use words like ‘may’ and ‘probably’ in the previous paragraph. So, our suggestions for dealing with where you are now are twofold. Firstly, for future disputes, or ones that are still inside the timescales in the termination table, you need to start using and quoting the provisions of W1 to your contractor. If you both decide that you need some time you can agree to extend the time limits in the table, as long as you do so before the time limit in question runs out, see clause W1.3(2). But, for the other long-running disputes, you will need to get some advice to see where you stand on those issues and the timescales involved.

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