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NEC ECC: How could Option X7 Delay Damages be levied by the original Employer if an existing contract is novated to another Employer and a CE issued and associated EOT is granted?

0 votes
The Contractor is delivering an NEC3 ECC Option C contract to Employer A. Contract completion date is 1st September 2018, when all equipment needs to be packaged and ready to send to site. Option X7 Delay Damages are applicable for failure to meet the Completion Date. We are likely to miss this date so are at risk of incurring Delay Damages.

Once the equipment is packaged and ready to send to site, Employer A wishes to novate the contract to another party, Employer B, at which point the site works will be included as a CE and the Contract Completion date extended to a new date to be agreed with Employer B.

Am I right to assume that if the above events happened, there is no way that Employer A could levy Delay Damages against us for late delivery as the contract would have novated to Employer B and the Completion Date would have moved as a result of the CE.

How could the Employer keep us on the hook for Delay Damages in this situation?
asked Feb 2 in NEC3 Secondary X, W & Y options by CM84 (120 points)  

1 Answer

0 votes
From a general point of view what Employer A and B are doing indicates a flawed contract strategy! However if Employer A knows what they are doing they'll manage the novation in such a way so that damages are deducted by them before it happens or by Employer B after it happens. You are right that once the contract has novated to Employer B, Employer A should in theory have no further rights or obligations under the contract, including the deduction of damages.

Presumably you've signed up to this contract knowing that it was always Employer A and B's intention to novate the contract and that they have an existing contractual right to do so? If so, and if they handle the novation in either of the two ways I've outlined you're unlikely to be able argue that the damages aren't enforceable.
answered Feb 7 by Neil Earnshaw (8,250 points)