Second set of NEC4 amendments published

In October 2020, a new set of amendments was dispensed for the NEC4 suite of contracts clarifying a number of payment issues and other matters that have been sources of contention in construction projects.
   
In October 2020, the suite was updated again. The detailed amendments can be downloaded here.
 
The key changes are summarised below.
 
Final dates for payment (Option Y(UK)2)
 
All NEC4 contracts that previously linked the final date for payment with the submission of an invoice (including the Professional Services Contract, Term Services Contract and Design Build Operate Contract) have been amended so that the final date for payment is a set number of days after the due date.
 
The due date has been changed so that it is now the later of (i) the date of receipt of an invoice and (ii) 14 days after the assessment date.
 
These amendments have been made to address the TCC's decision in Rochford Construction Limited v Kilhan Construction Limited [2020] EWHC 941 (TCC), a case in which Fieldfisher represented the successful contractor.
 
The TCC decided that a final date for payment in a construction contract must be linked to the payment due date, rather than triggered by any other event or circumstance, otherwise the payment provisions risk being non-compliant with the Housing Grants, Construction and Regeneration Act 1996.
 
Delay damages (Option X7)
 
All NEC4 contracts with the option to include delay damages have been amended to clarify that delay damages are only payable up to the date of termination.
 
This amendment has been made to address the decision in Triple Point Technology v PTT Public Company [2019] EWCA Civ 230.
 
In that case, the Court of Appeal held that a clause providing for liquidated delay damages, which was similarly worded to the original NEC4 X7 wording, did not apply on termination. This meant the employer was only entitled to general unliquidated damages for delay, rather than liquidated delay damages up to the date of termination.
 
Early Contractor involvement (Option X22)
 
Option X22 in the NEC4 Engineering and Construction Contract and the Alliance Contract has been replaced.
 
The replacement provisions provide a more structured process for the issue of a notice to proceed to Stage Two and for the parties to agree changes to Access Dates, Key Dates, Completion Dates and Prices.
 
Project bank accounts (Option Y(UK)1)
 
Option Y(UK)1 has been replaced across the NEC4 suite to reflect user feedback and best practice.
 
 The key changes are:
 

• Choice of account holder – the client can decide how involved it wants to be in the management of the project bank account by deciding whether or not the account is to be held jointly by it and the relevant supplier.
• Electronic banking – the clauses have been updated to reflect electronic banking methods.
• Authorisation – depending on the contract, the provisions for authorisation have either been simplified or replaced with the requirement for a Payment Schedule. The Payment Schedule is a list of payments to be made to the supplier and its Named Suppliers and is prepared by the supplier and provided to the project bank.
• Project Bank Account Tracker – this tracker is prepared by the supplier and contains a register of all payments made to and from the project bank account along with the dates of payment.

 
Contractor's liabilities (81.1)
   
The clauses in section 7 setting out the rights to use equipment, Plant and Materials and other materials provided by the relevant client have also been simplified.
 
This article was authored by Christina Cheriyan, construction associate at Fieldfisher.