NEC ECC: Assessment for lack of Warranties

Under an NEC3 Option A contract a contractor has yet to provide Warranties for individual packages (piling, steelwork, and design).

The client has instructed that a sum of money is retained relating to each of these packages until such time that the warranties are received. They determine that the Activity is not complete until the warranties are received.

There were no Z clauses added to cover this and the requirement for Warranties was not written into the Works Information.

In assessing the amount due can a sum of money be retained from the contractor for lack of warranties or is this deemed to be “retained” within the agreed retention figure?

A supplementary question, if warranties are required, should they be part of the Works Information or deemed within the fee?

Many thanks.

Under an NEC3 ECC main option A, the required warranties would likely be included as an activity on the Activity Schedule. Payment of these would be dependent upon completion of the relevant activity, as determined by the definition of Price for Work Done to Date. If the warranty requirements have been included with other work in a ‘combined’ activity then they wouldn’t be paid for until the ‘combined’ activity work is completed.

If a warranty is required then it could be included as part of the Works Information requirements, which determines what the Contractor is to do and describes any constraints on how they do something. Alternatively it may be included as an additional condition of contract ‘z-clause’. Under NEC4 this issue is now dealt with under secondary option X8.

For main options C, D or E the cost of warranties is treated as included in the Fee, as there is no cost component in the SCC which provides for this.

In direct answer to your question, there would be no need to retain monies as payment would not be due until the associated activity is completed.

Further to your question due to ‘privity of contract’ there is no implied obligation to provide collateral warranties, so this should be described as a requirement in the Works Information or included as a contract condition. There could be certain rights under the Contracts (Rights of Third Parties) Act 1999, although if this were intended then option Y(UK)3 should have been included. Any ‘assumed’ ‘3rd Party’ rights and obligations, in the absence of Y(UK)3, however, would likely be substantially different to those required under a collateral warranty.