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NEC3 ECC: Due date for terminated final payment

+1 vote
In the NEC3 short subcontract it is not laid out how the final payment is calculated and when the final payment is due. If we terminate for reason 2, who determines what the forecast additional cost is? And once decided, what is the time scale for making the final payment?
asked Mar 22 in NEC3 Termination by Holly  

1 Answer

0 votes
Termination of a contract has to be handled very carefully, so the first step is to ensure that you comply with the contractual procedures and resist allowing either party to deviate away from this. So to terminate for reason 2 you first need to give notice under clause 90.3 and then give the Subcontractor two weeks in order to stop defaulting. If they fail to do this you can then give notice under clause 90.1. Pay particular attention to how the notice should be served under clause 13.1 and any amendments that may have been made e.g. an additional obligation to serve by recorded delivery.

You are correct in stating that the ECSS does not describe final payments however when clauses 50.1, 50.3, 50.4, 51.1 and 92.1 are read together you have sufficient information to be able to calculate amounts due on termination and to know when to pay it.

The issue of finality is not however dealt with so if this is a concern you may want to prepare a final account statement and get both parties to sign it "in full and final settlement". Whilst this isn't required under the contract, it's fairly common practice to use one to bring things to a closure. Bear in mind though, the Subcontractor is unlikely to want to sign up to such a statement (they may disagree with your termination and be seeking dispute resolution on this) and that if they do the Contractor may lose the right to recover additional costs beyond those which were forecast at the point of termination e.g. correcting defects in the Subcontractor's work.
answered Mar 24 by Neil Earnshaw (7,460 points)