Compensation Events

The NEC Engineering and Construction Contract 3rd Edition (NEC3) was published in June 2005. It has been adopted as the contract of choice by the government, and The NEC4 suite of contracts has now been introduced in order say the NEC to reflect user feedback, industry developments and user best practice.

You can find more information about NEC contracts here on our site: About NEC Contracts 

Compensation events are referred to in NEC3 and NEC/4, and are similar to variations, relevant events and relevant matters referred to in other forms of contract such as JCT contracts.

Compensation events will normally result in additional payment being made and potentially an adjustment of the completion date or key dates.

The contract limits compensation events to those, and only those, identified in the contract and these are set out in clause 60.1. There is also provision for the dreaded Z Clauses where unscrupulous Contractors can omit, add or redefine compensation events. So, great care must be taken to carefully review such issues.

You can get your contract reviewed for onerous terms here; Contract Checking Service

In unamended forms the specific compensation events include:

  • Instructions to change the scope of the works (unless this results from accepting a defect, or from a change requested by the subcontractor).
  • Failure to provide access.
  • Failure of the client to provide equipment, plant or materials.
  • An instruction to halt, or delay the works.
  • Work done by others.
  • Conditions that could not reasonably have been foreseen.
  • Exceptionally adverse weather (beyond one in ten year frequency).
  • Force majeure (such as an epidemic or an ‘act of God’).

The NEC contract is very prescriptive and both parties must give early warning of anything that may delay the works, or increase costs. Ordinarily, they should then hold an early warning meeting to discuss how to avoid or mitigate impacts on the project. If you fail to give early warning of a possible delay to the works, or increase in costs, your entitlements will be limited accordingly.

Our advice to Specialist Contractors, Trade Contractors and Subcontractors about Compensation Events is not to leave anything to chance. We have Consultants who specialise in NEC contracts and can provide you with cost effective professional advice. Call our Helpline on 01773 712116 or email info@streetwisesubbie.com.

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