Ambiguities and inconsistencies

NEC3 and NEC4 Contracts
1

A quick question which came up in a seminar today and I’m second guessing myself!

There is an inconsistency in the Scope; the Scope provided by the Client requires the installation of 5 street bollards but the Scope provided by the Contractor requires the installation of 50. The PM issues an instruction stating that 5 are to be installed. This is a change in the Scope and a compensation event under clause 60.1(1).

In assessing that compensation event we look at clause 63.10 which says that the Prices are deemed to be for the interpretation most favourable to the Party who did not provide the Scope. In this case, the incorrect Scope was provided by the Contractor; accordingly, it is assumed that the Contractor priced for 50 (which is the Prices most favourable to the Client) and so a compensation event is assessed as an omission of 45 bollards and the Client gets a saving.

Right? This seems fair.

However, one of the exclusions at clause 60.1(1) is ‘a change to the Scope provided by the Contractor…in order to comply with the Scope provided by the Client’. Which is what we have here. So no compensation event?

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2

Good question Steven

It sounds like it’s caught by the second bullet point under the exception i.e. change in Scope provided by the Contractor for its design which is made in order to comply with the Scope provided by the Client.

This appears to reflect the contra proferentem principle as the Contractor was responsible for the inconsistency.

It seems odd that 5 would be misinterpreted to be 50 which makes me wonder if the Contractor may have a defence at common law for mistake? If you’re on their side it might be worth a go if the financial consequences are significant.

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3

Thanks Neil - that’s also my conclusion - but 63.10 says that the Prices are deemed to be for the interpretation most favourable to the Client, which would be that the Contractor priced for 50 and then there should be a saving. If the exception at 60.1(1) applies, then there is no need for 63.10.

PS it’s a made up scenario in a seminar

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4

I see yes, that would apply to this situation as the event never gets assessed as it’s not a CE, however, in other circumstances 63.10 would be necessary.

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5

So if the Scope comprises both Contractor and Client Scope, then there are 4 possible scenarios:

  1. The inconsistency is entirely within the Client Scope, and an instruction to change the Scope to remove it would be a compensation event. Clause 63.10 kicks in and presumes the Contractor priced the cheaper option
  2. The inconsistency is entirely within the Contractor’s Scope, an instruction to change the Scope is a compensation event and clause 63.10 says that the Client can presume the Contractor priced the most expensive option
  3. The inconsistency is between the Client and Contractor’s scope and the Contractor is correct. An instruction to change the Scope is a compensation event and the Contractor can presume that the cheaper option it priced is correct (even if that means it priced what the Client’s Scope says rather than what its own Scope says)
  4. The inconsistency is between the Client and Contractor’s Scope and the Client is correct. An instruction to correct is caught by the exceptions at clause 60.1(1) and is therefore not a compensation event.

Just to clarify point 3, if the Contractor’s Scope says 50 bollards and the Client’s Scope says 5, the instruction to correct the Client’s Scope to 50 will be a compensation event and the operation of 63.10 says that the prices are interpreted in favour of the Contractor. So the compensation event is assessed as an additional 45 bollards even though the Contractor’s own Scope says 50.

Does that sound right?

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6

The situation may be made more complicated where main option B or D are used with a quantity stated in the Bill of Quantities.

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