NEC TSC: Are the provisions of Clause 91.2 dependent on following the procedure as listed under Clause 90.1 or can termination be effected directly

NEC3 and NEC4 Contracts Termination
1

Two aspects to this question based on NEC 3 Term Service Contract;

  1. The Employer terminates citing R11 , substantial failure to perform as the reason under Clause 91.2. Before the termination a default notice is clearly required from the Service Manager. On the lapse of the 4 weeks it is implied that the Service Manager advises the Employer of the status of contractor’s default. The employer can then make up his mind if the default still exists and proceed with the termination. Assuming the Employer decides to proceed with the termination, does he then need to notify the Service Manager and the other party giving details of his reasons for termination as provided for under clause 90.1? Or can termination be carried out under 91.2 directly?

  2. Under the Data for secondary option clauses Z is a statement that;
    ‘The Contractor will not be granted four weeks duration to put the default right as per core clause 91.2 if the Contractor, as per first bullet,’‘substantially fails to provide the service(R11)’’.
    Will a notice by the Service Manager still be required under this changed scenario to the Contractor? Will the termination be effected directly under 91.2 or will the procedure under 90.1 be followed?

2

  1. Termination for “substantially failing” requires two separate notifications and a certificate. The first notice is the one required under clause 91.2 from the Service Manager to the Contractor notifying of the default (copied to the Employer). After 4 weeks the Employer has the right to terminate if the Contractor hasn’t put the default right. The termination would commence under clause 90.1 with a notice from the Employer to the Service Manager and the Contractor explaining why he wishes to terminate for substantial failure. The termination is then finalised with the issue of a termination certificate if the Service Manager agrees with the Employer that the Contractor has substantially failed. It is implied that the Service Manager should issue the termination certificate within the period for reply after receipt of the notification from the Employer. Strict compliance with the procedures in the contract by the Employer and Service Manager is essential to avoid a repudiatory breach of contract at common law which would give the Contractor the right to terminate and recover greater amounts than if the termination had been compliant. The bigger problem to resolve is how to determine what substantial failure means as it isn’t defined. I’d recommend that the Employer seeks legal advice before proceeding down this route.

  2. The first sentence in 91.2 can be divided into two obligations. Firstly the Service Manager has an obligation to notify and secondly the Contractor has an obligation to put the default right. I’d suggest that the Z clause doesn’t dispense with the need for the Service Manager to notify the Contractor, which may seem ridiculous and uneccessary however that is the unintended consequence of a badly drafted Z clause! Basically follow the same procedure as you would have without the Z clause, just without the need to wait four weeks. Again, I’d recommend legal advice before going any further.

3

Thanks for your answer.It clarifies the issue.