Liquidated Damages After Termination

NEC 3 Supply Contract

Unfortunately it is likely that a project we are working on is going to be terminated due to our poor performance and constant delays. Clause X7 is included in the contract and I am unsure how that works with termination. At the time of termination we will be 6 months over the contractual completion date, and our programmes are showing that the planned completion date is not for another 6 months.

Do LD’s still apply upon termination?
Are we liable for the 6 months prior to termination?
Are we liable for the 6 months prior and the remaining 6 months on the accepted programme?
Or does it work in another way that I’m not aware of?

At the point in time when the contract is terminated, the primary contract performance obligations are discharged. That means that delay damages are not payable from the date of termination, although any liability to pay these up to the date of termination would still apply.

This point was specifically confirmed in the UK Supreme Court decision in;

  • Triple Point Technology, Inc (Respondent) v PTT Public Company Ltd (Appellant) [2021] UKSC 29

NEC amendments, dated October 2020, amended X7 to clearly state that delay damages were payable up to the date of termination. This was to provide clarity in response to the Appeal Court decision in the above case, which was subsequently overturned by the Supreme Court, with the NEC amendments being in accord with the Supreme Court ruling.

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