NEC ECC: Compensation Event Time Bar Clause 61.3

NEC3 and NEC4 Contracts Compensation Events
1

Under NEC3 ECC, to ensure a change to the Prices, the Completion Date or Key Date, the Contractor was required to ’ … notify a compensation event within eight weeks of becoming aware of the event … '.

Under NEC4 ECC, however, the Contractor is required to ’ … notify a compensation event within eight weeks of becoming aware THAT THE EVENT HAS HAPPENED … '.

Articles have been written to discuss this change and suggested that some form of judicial clarification is required to establish whether the ‘time bar’ for the awareness test applies to;

  • when the event actually happens,
    or
  • when the event is known to be a compensation event.

Personally I would suggest the latter as there is no contract provision to notify a compensation event for an event which is NOT actually a compensation event.

Any thoughts?

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2

Good question.

I think the obligation is on the Contractor to notified if he believes the matter to be a compensation event so presumably it is within 8 weeks of becoming aware that a matter he believes is a compensation event happened. It is up to the PM to decide if the matter is a CE.

The provision is to notify in the belief that it is a CE, if the PM decides otherwise the notification was still valid so arguable there is provision to notify for an event which is not a CE.

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3

Further to the above, having considered this issue, it seems that there are 3 possible scenarios as follows;

  1. An event happens
  2. The Contractor is aware an event has happened
  3. The Contractor is aware that the event is a compensation event.

I would suggest that the 8 weeks starts when item 2) occurs.

Obviously the ‘awareness’ point in time is subjective, however, for 1) an event could happen which you don’t know about for some time and so you could be time barred before you are even aware it actually happened. Also, 3) would not mean that the matter is dealt with promptly as it would give the Contractor 8 weeks to notify after he realizes it is actually a CE which doesn’t sit comfortably with the NEC intent of dealing with matters as they arise.

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4

Hi Andrew,

We currently have an issue that is exactly how you have described.

NEC4 Option A ECS – Red Diesel Change in Law
• Contract Starting date 26th of April 2021.
• The finance act 2021 received royal assent and became law on the 10th of June 2021
o Prohibiting the use of red diesel on construction sites.
• Became aware of this change on the 20th of January 2022 and raised an EWN to highlight the potential issue.
• Raised a NCE on the 17th of March.
Would you consider this within the eight week notification period of becoming aware of a CE and hence a genuine Compensation Event? Or would you consider this to be time barred?

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