Negotiating an NEC4 subcontract has resulted in an agreement to cap delay damages at 10% of the subcontract value.
The intention is to cap these at 10% of the final subcontract value (i.e. inclusive of compensation events).
How is this best worded in X7?
Proposal is to write ‘capped at 10% of the final subcontract value’. However, it’s been queried that this should instead be drafted as ‘10% of the final total of the subcontract Prices’.
The intention is there with both, but I’m unsure which is strictly the right way to address the subcontract.
Hi Matthew, which main Option is it and is Secondary Option X18 included?
If you want to amend X7, I would amend X7.1 by including a statement after the 3rd bullet as follows.
‘The total amount of delay damages payable by the Subcontractor under this contract is limited to 10% of the total of the Prices’.
The thing you need to think about is when is the total of the Prices calculated, e.g. at the Completion Date or the final total of the Prices in the final assessment?
The main Option may also have an impact, if it is an Option C or D on the Subcontractor’s share.
If you have X18 in the Subcontract you could look at amending it by omitting delay damages for the list of excluded matters and adding the limit in the Subcontract Data.
Subcontracts are typically Option A or B, X18 is typically included by agreement.
I think calculating at completion date is fair, as this is the point that damages are typically levied. Any works between then and the final assessment would typically be additional works and sit within the defects period (i.e. not tied to completion).
Work between Completion Date and Completion are likely to be uncompleted original Scope not additional works, hence why the delay damages are being applied. If they are additional works there should be an entitlement to be compensated and therefore a change to the Completion Date, but I agree, the Completion Date is probably the right point to calculate from.
I think we’re on the same page, as my reference to Completion was in relation to their actual completion date (i.e. when planned completion materialises into actual completion).
I think the wording you previously referenced is best practice, so will look at this going forward.