The NEC4 Engineering and Construction Contract A Commentary

The authoritative guide to the NEC4 Engineering and Construction Contract

The New Engineering Contract (NEC) is one of the leading standard forms of contract for major construction and infrastructure projects. The latest edition of the contract (NEC4) is now a suite of contracts widely used in the UK, Australia, Hong Kong, South Africa, Ireland, and New Zealand. This timely and important book provides a detailed commentary on the latest edition of the main NEC4 Engineering and Construction Contract (NEC4 ECC) form. It explains how the contract is intended to operate and examines each clause to consider its application and legal interpretation. It also draws upon the author's highly successful third edition of the book covering the previous contract. It identifies and comments on the changes between the current and previous version of the form.  

After a brief introduction to the new edition of the form, The NEC4 Engineering and Construction Contract offers in-depth chapters covering everything from main options and secondary option clauses to risk assurances and NEC 4 family contracts. In between, readers will learn about general core clauses, the obligations and responsibilities of the contractor, testing and defects, payments, compensation events, and much more.

• Covers the latest version of the NEC Engineering and Construction Contract, the leading standard form contract for major construction projects
• Examines the new contract clause by clause and compares it with the previous edition
• Previous editions were widely acknowledged as detailed and fair analyses of the NEC contracts
• Written by a highly regarded contracts commentator, experienced arbitrator, and adjudicator

The NEC4 Engineering and Construction Contract: A Commentary is an excellent book for construction industry professionals working for clients, employers, main contractors, project managers, subcontractors, and specialist contractors.

BRIAN EGGLESTON CEng, FICE, FIStructE, FCIArb, was a chartered arbitrator with extensive UK and international experience and was past President of the Chartered Institute of Arbitrators. He acted as an adjudicator and mediator, as an adviser to contractors and employers on contractual matters and was a well-known author and speaker on contract law and standard forms. In a career spanning over 40 years he worked on all sides of the construction industry, firstly as a bridge designer, then as a resident engineer and contracts administrator, and subsequently as a director of various building and civil engineering contracting companies.

Preface xv

Author’s notex vii

1 Introduction 1

1.1 Overview 1

1.2 Background 1

1.3 Objectives 1

1.4 Impacts of change 2

1.5 The NEC4 suite of contracts 3

1.6 Characteristics of NEC contracts 3

1.7 Structure of the NEC4 engineering and construction contract (ECC4) 4

1.8 Changes ECC3 to ECC4 6

1.9 Review of points of interest 7

1.10 Entire agreement 7

1.11 Exclusion of common law rights 8

1.12 Conditions precedent to compensation event claims 8

1.13 Role and powers of the project manager 8

1.14 Changes to scope (previously Works Information) 9

1.15 Prevention 9

1.16 Quotations for compensation events 9

1.17 Assessments of compensation events 9

1.18 Dispute avoidance and dispute resolution 10

2 Changes from ECC3 11

2.1 Evolution 11

2.2 Features and enhancements 11

2.3 Terminological changes 12

2.4 Changes to core clauses 12

2.5 Changes to dispute resolution procedures 15

2.6 Changes to secondary option clauses 16

2.7 Data sheet changes 16

3 Main options 17

3.1 Introduction 17

3.2 Contract strategy 18

3.3 Responsibility for design 19

3.4 Certainty of price 20

3.5 Allocation of risk 21

3.6 The Client’s requirements 22

3.7 Operating restrictions 23

3.8 Early start and/or rapid finish 23

3.9 Flexibility in contractual arrangements 23

3.10 Aversion to disputes 23

3.11 Single point responsibility 24

3.12 Option A – priced contract with activity schedule 24

3.13 Option B – priced contract with bill of quantities 25

3.14 Target contracts generally 27

3.15 Options C and D – target contracts 29

3.16 Option E – cost reimbursable contract 30

3.17 Option F – management contract 31

3.18 Options W1, W2, W3 – resolving and avoiding disputes 31

4 Secondary options 32

4.1 Introduction 32

4.2 Choice of secondary option clauses 33

4.3 Status of secondary option clauses 33

4.4 Option X1 – price adjustment for inflation 34

4.5 Option X2 – changes in the law 34

4.6 Option X3 – multiple currencies 35

4.7 Option X4 – ultimate holding company guarantee 36

4.8 Option X5 – sectional completion 36

4.9 Option X6 – bonus for early completion 37

4.10 Option X7 – delay damages 37

4.11 Option X8 – undertakings to the client or others 42

4.12 Option X9 – transfer of rights 42

4.13 Option X10 – information modelling 43

4.14 Option X11 – termination by the Client 43

4.15 Option X12 – multiParty collaboration 44

4.16 Option X13 – performance bond 45

4.17 Option X14 – advanced payment to the contractor 47

4.18 Option X15 – the contractor’s design 48

4.19 Option X16 – retention 49

4.20 Option X17 – low performance damages 50

4.21 Option X18 – limitation of liability 51

4.22 Option X20 – key performance indicators 55

4.23 Option X21 – whole life cost 56

4.24 Option X22 – early contractor involvement 56

4.25 Option Y(UK)1 – project bank account 57

4.26 Option Y(UK)2 – housing Grants, construction and regeneration act 1996 57

4.27 Option Y(UK)3 – contracts (Rights of Third Parties) act 1999 58

4.28 Option Z – additional conditions of contract 58

5 Contract documents 59

5.1 Introduction 59

5.2 Entire agreements 60

5.3 Clause 12.4 of ECC4 61

5.4 Construction of contracts generally 62

5.5 ECC4 documentation 63

5.6 Essential contract documents 64

5.7 Identified and defined terms 65

5.8 The Contract Date 66

5.9 Scope 67

5.10 Site Information 70

5.11 Contract Data 72

5.12 Schedules of cost components 72

5.13 Ambiguities and inconsistencies in the contract documents 74

5.14 Schedule of clauses referring to the Scope 74

6 Key players 79

6.1 Introduction 79

6.2 Others 81

6.3 Actions 82

6.4 Mutual trust and co-operation 83

6.5 The Client 84

6.6 Express obligations of the client 85

6.7 The Project manager 86

6.8 Express duties of the project manager 89

6.9 The supervisor 97

6.10 Express duties of the supervisor 97

6.11 Communications 98

6.12 The Project manager and the supervisor 102

7 General core clauses 104

7.1 Introduction 104

7.2 Mutual trust and co-operation 105

7.3 Actions 106

7.4 Identified and defined terms 107

7.5 Interpretation and the law 116

7.6 Communications 117

7.7 The Project manager and the supervisor 117

7.8 Instructions 118

7.9 Early warning 118

7.10 Contractor’s proposals 121

7.11 Requirements for instructions 121

7.12 Illegal and impossible requirements 122

7.13 Corrupt Acts 123

7.14 Prevention 123

8 Obligations and responsibilities of the Contractor 128

8.1 Introduction 128

8.2 Design obligations, responsibilities and liabilities 131

8.3 Providing the works 133

8.4 The Contractor’s design 134

8.5 Using the Contractor’s design 137

8.6 Design of equipment 138

8.7 People 138

8.8 Working with the client and others 140

8.9 Subcontracting 142

8.10 Other responsibilities 145

8.11 Assignment 147

8.12 Disclosure 147

8.13 Express obligations of the contractor 148

8.14 Express prohibitions on the contractor 155

9 Time (and related matters) 157

9.1 Introduction 157

9.2 Starting and completion 159

9.3 Programmes 161

9.4 Revision of programmes 165

9.5 Shortened programmes 167

9.6 Access to and use of the site 168

9.7 Instructions to stop or not to start work 169

9.8 Take over 171

9.9 Acceleration 173

10 Quality management 175

10.1 Introduction on quality management 175

10.2 Contractual provisions of ECC4 on quality management 176

10.3 Understanding the contractual provisions on quality management 177

10.4 Introduction on testing and defects 177

10.5 Definitions and certificates 180

10.6 Tests and inspections 183

10.7 Testing and inspection before delivery 186

10.8 Searching for and notifying defects 186

10.9 Correcting defects 188

10.10 Accepting defects 190

10.11 Uncorrected defects 191

11 Payments 193

11.1 Introduction 193

11.2 Assessing the amount due 196

11.3 Payments 198

11.4 Defined cost 201

11.5 Payments – main option A 202

11.6 Payments – main option B 205

11.7 Payments – main option C 206

11.8 Payments – main option D 210

11.9 Payments – main option E 211

11.10 Payments – main option F 211

11.11 Final assessment 212

11.12 Status of and disputes on final assessments 213

12 ECC4 compensation event schemes 215

12.1 Introduction 215

12.2 Structure of ECC4 compensation events schemes 217

12.3 Amendments and additions 217

12.4 Outline of procedures 219

12.5 Defining a compensation event 220

12.6 Compensation events as exclusive remedies 220

12.7 Fairness of the compensation event procedures 222

12.8 Unusual features of the compensation event procedures 222

13 Listed compensation events 223

13.1 Introduction 223

13.2 Omissions from the listed events 224

13.3 Scope-related events 224

13.4 Client’s default events 226

13.5 Client’s liability events 229

13.6 Project manager/supervisor-related events 230

13.7 Physical conditions 233

13.8 Adverse weather 236

13.9 Prevention 237

13.10 Measurement-related events 238

13.11 Secondary option clause events 240

14 Notifying compensation events 242

14.1 Introduction 242

14.2 Notifications by the project manager 242

14.3 Notifications by the contractor 244

14.4 Project Manager’s response to notifications 248

14.5 Last date for notification of compensation events 250

15 Quotations for compensation events 252

15.1 Introduction 252

15.2 Instructions to submit quotations 253

15.3 Failure to give early warning 253

15.4 Assumptions for assessment of quotations 254

15.5 Primary clauses on quotations 255

15.6 Submissions of quotations 255

15.7 Revised quotations 256

15.8 Failure to reply to quotations 256

15.9 General comment on ECC4’s assessment and quotation systems 256

16 Assessment of compensation events 258

16.1 Introduction 258

16.2 Changes from ECC3 259

16.3 General assessment rules 260

16.4 Particular assessment rules 265

16.5 The Project manager’s assessments 268

16.6 Implementing compensation events 270

16.7 Other financial remedies 272

17 Title 273

17.1 Introduction 273

17.2 Client’s title to equipment, plant and materials 274

17.3 Marking equipment, plant and materials 275

17.4 Removing equipment 276

17.5 Objects and materials within the site 276

18 Liabilities and insurance 279

18.1 Introduction 279

18.2 Liabilities and insurance under ECC4 283

18.3 Client’s liabilities 284

18.4 Contractor’s liabilities 287

18.5 Recovery of costs 288

18.6 Insurances 289

18.7 The Insurance table 289

18.8 Insurance policies 289

18.9 Contractor’s failure to insure 290

18.10 Insurance by the client 291

19 Termination 292

19.1 Introduction 292

19.2 Termination under ECC4 294

19.3 Reasons for termination under ECC4 295

19.4 The Termination table and the termination certificate 296

19.5 Comment on reasons 297

19.6 Procedures on termination 300

19.7 Amounts due on termination 301

20 Dispute avoidance and dispute resolution 303

20.1 Introduction 303

20.2 Overall structure of ECC4 dispute avoidance and dispute resolution provisions 304

20.3 Option W3 – the Dispute avoidance board 305

20.4 Choice of options 305

20.5 Involvement of denior representatives 305

20.6 Meaning of dispute 306

20.7 Adjudication under option W1 308

20.8 Adjudication under option W2 316

20.9 Review by the tribunal 320

20.10 The Adjudicator’s contract 323

21 NEC4 Engineering and construction Subcontract 324

21.1 Introduction 324

21.2 Structure of the ECC4 subcontract 325

21.3 Common core clause grouping 326

21.4 Core clauses – general 327

21.5 Core clauses – the Subcontractor’s main responsibilities 327

21.6 Core clauses – time 328

21.7 Core clauses – quality management 329

21.8 Core clauses – payment 329

21.9 Core clauses – compensation events 330

21.10 Core clauses – title 330

21.11 Core clauses – liabilities and insurances 331

21.12 Core clauses – termination 331

21.13 Resolving and avoiding disputes 331

22 Legal decisions on NEC-based contracts 333

22.1 Introduction 333

22.2 ABB Limited v. Bam Nuttall Ltd [2013] EWHC 1983 (TCC) 333

22.3 Amey LG Ltd v. Cumbria County Council [2016] EWHC 2856 (TCC) 333

22.4 Amey Wye Valley Ltd v. The County of Herefordshire District Council (Rev1) [2016] EWHC 2368 (TCC) 334

22.5 Anglian Water Services Ltd v. Laing O’Rourke Utilities Ltd [2010] EWHC 1529 (TCC) 334

22.6 Arbitration Application No 2 of 2016 & [2017] Scot CS CSOH 23 (P1039/16) 335

22.7 Arcadis UK Ltd v. May and Baker Ltd (t/a Sanofi) [2013] EWHC 87 335

22.8 AMEC Group Ltd v. Secretary of State for Defence [2013] EWHC 110 (TCC) 335

22.9 Aecom Design Build Ltd v. Staptina Engineering Services Ltd [2017] EWHC 723 (TCC) 336

22.10 Atkins Ltd v. Secretary of State for Transport [2013] EWHC 139 (TCC) 336

22.11 Balfour Beatty Ltd v. Gilcomston North Ltd and O Turner Insulation Ltd [2006] Scot CS CSOH 81 337

22.12 Cleveland Bridge UK Ltd v. Sarens (UK) Ltd [2018] EWHC 751 (TCC) 337

22.13 Beumer Group UK Ltd v. Vinci Construction UK Ltd [2016] EWHC 2283 (TCC) 338

22.14 Costain Ltd v. Tarmac Holdings Ltd [2017] EWHC 319 (TCC) 338

22.15 Dynniq UK Ltd v. Lancashire County Council [2017] EWHC 3173 (TCC) 339

22.16 Costain Ltd & O’Rourke Civil Engineering Ltd & Bachy Soletance Ltd & Emcor Drake and Scull Group PLC v. Bechtel Ltd & Mr Fady Bassily [2005] EWHC 1018 (TCC) 339

22.17 Ecovision Systems Ltd v. Vinci Construction UK Ltd (Rev1) [2015] EWHC 587 (TCC) 340

22.18 Farelly (M&E) Building Services Limited v. Byrne Brothers (Formwork) Ltd [2013] EWHC 1186 (TCC) 340

22.19 Fermanagh District Council v. Gibson (Banbridge) Ltd [2014] NICA 46 341

22.20 Ground Developments Ltd v. FCC Construction SA & Ors [2016] EWHC 1946 (TCC) 341

22.21 Henry Brothers (Magherafelt) Ltd & Ors v. Department of Education for Northern Ireland [2007] NIQB 116, [2008] NIQB 105 341

22.22 Imtech Inviron Ltd v. Loppingdale Plant Ltd [2014] EWHC 4006 (TCC) 342

22.23 Imperial Chemical Industries Ltd v. Merit Merrell Technology Ltd [2018] EWHC 1577 (TCC) 342

22.24 Imperial Chemical Industries Ltd v. Merit Merrell Technology Ltd [2016] EWHC B30 (TCC) [2017] EWHC 1763 (TCC) 342

22.25 Imperial Chemical Industries Ltd v. Merit Merrell Technology Ltd [2015] EWHC 2915 (TCC) 343

22.26 Liberty Mercian Ltd v. Cuddy Civil Engineering Ltd & Anor [2013] EWHC 2688 (TCC), [2013] EWHC 4110 (TCC), [2014] EWHC 3584 (TCC) 343

22.27 McAlpine PPS Pipeline Systems Joint Venture v. Transco PLC [2004] EWHC 2030 (TCC) 344

22.28 FP McCann Ltd v. The Department for Regional Development [2016] NICh 12 344

22.29 McConnell Dowell Constructors (Aust) Pty Ltd v. National Grid Gas PLC [2006] EWHC 2551 (TCC) 344

22.30 Mears Ltd v. Shoreline Housing Partnership Ltd [2013] EWHC 27, [2015] EWHC 1396 345

22.31 Maersk Oil UK Ltd (formerly Kerr-McGee Oil (UK) PLC) v. Dresser-Rand (UK) Ltd [2007] EWHC 752 (TCC) 345

22.32 J Murphy & Sons Ltd v. W. Maher and Sons Ltd [2016] EWHC 1148 (TCC) 345

22.33 Northern Ireland Housing Executive v. Combined Facilities Management [2014] NIQB 75 [2015] 346

22.34 Northern Ireland Housing Executive v. Healthy Buildings Ltd [2013] NIQB 124/[2017] NIQB 43 346

22.35 ROK Building Limited v. Celtic Composting Systems Ltd [2009] EWHC 2664 (TCC), [2010] EWHC 66 347

22.36 RWE Npower Renewables Ltd v. JN Bentley Ltd [2013] EWHC 978 (TCC) 347

22.37 RWE Npower Renewables Ltd v. JN Bentley Ltd [2014] EWCA Civ 150 347

22.38 Secretary of State for Defence v. Turner Estate Solutions Limited [2015] EWHC 1150 (TCC) 348

22.39 SGL Carbon Fibres Ltd v. RBG Ltd [2012] Scot CS CSOH 19, [2010] CSOH 77 348

22.40 Stork Technical Services (RBG) Ltd v. Ros [2015] CSOH 10A 348

22.41 Shepherd Construction Ltd v. Pinsent Masons LLP [2012] EWHC 43 (TCC) BLR 213, 141 Con LR 232 348

22.42 Seele Austria GmbH & Co Kg v. Tokio Marine Europe Insurance Ltd [2009] EWHC 2066 (TCC) 349

22.43 SSE General Ltd v. Hochtief Solutions AG & Anor [2015] Scot CS CSOH 92 349

22.44 Vinci Construction UK Ltd v. Beumer Group UK Ltd [2017] EWHC 2196 (TCC) 350

22.45 Volker Stevin Limited v. Holystone Contracts Limited [2010] EWHC 2344 (TCC) 350

22.46 Wales and West Utilities Limited v. PPS Pipeline Systems GmbH [2014] EWHC 54 (TCC) 351

22.47 Walker Construction (UK) Ltd v. Quayside Homes Ltd and Peter Brett Associates LLP [2014] EWCA Civ 93 351

22.48 (1)Walter Llewellyn & Sons Limited (2) ROK Building Limited v. Excel Brickwork Limited [2010] EWHC 3415 (TCC) 352

22.49 AE Yates Trenchless Solutions Ltd v. Black & Veatch Ltd [2008] EWHC 3183 (TCC) 352

22.50 Weatherford Global Products Ltd v. Hydropath Holdings Ltd & Ors [2014] EWHC 2725 (TCC) 352

22.51 WSP Cel Ltd v. Dalkia Utilities Services PLC [2012] EWHC 2428 (TCC) 353

Table of cases 355

Table of clause references 359

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