NEC3 Compensation Event notified after the defects date

I have recently picked up a historic ‘claim’ submitted by a Contractor, key facts summarised below;

  • Completion Certificate is dated 30/06/2015 (was issued in Nov 2016, not sure why over a year later). Contractor chased cert in Feb 2016 and was issued in June 2016, both parties agreeing to the date on the cert. Included was the supervisors notification of a defect, listing approx 10 defects.
  • Defects date (in CD Pt1) is 52 weeks after completion. Making the defects date 30/06/16.
  • Some defects are corrected Oct-Nov 2016. Outstanding defects are deferred until 2017 as conditions (temperature and rainfall) to correct are not preferential during the worst winter months (Dec-Feb).
  • In July & Aug 2017, conversations take place between the PM and Contractor regards completing the outstanding defects. Contractor states there was no mobilisation to site to correct defects due to weather.
  • Aug to Dec 2018, outstanding defects are corrected. During this period there is a delay of 10 weeks due to an event that is an Employers risk as stated in the contract (Cl 60.1(14)).

Assuming the above summarised account provided by the Contractor is accurate, I see two options as a starting point;

  1. Advise the Contractor that a Compensation Event cannot be notified after the defects date (Cl 61.7). Bearing in mind a ‘back dated’ Completion Cert was issued after the defects date.

  2. Request the Contractor provides a copy of the communication where they notified a Compensation Event to the PM, within 8 weeks of becoming aware of the event (Cl 61.3).

Which of the above would be most appropriate? Any other options, or anything I’m missing or should consider?

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I think the real answer here is slightly more fundamental. You need to go back to the premise on which a defect is being corrected (of course remembering that it is a defect and should never have been there really).

The Contractor has no right to any payment for correcting a defect after Completion. All of the rectification costs are to be met by the Contractor. Where a building is in use and the Contractor is returning to correct a Defect the Contractor needs to find a way to work with that and may find itself liable in damages for any harm suffered. The concept of Compensation Events is not really relevant at all. I would however have a look at clause 45 and see whether access was granted and whether the defect was or was not corrected in the defect correction period. From the history given, the process envisaged by the contract was abandoned but the Contractor remained liable for correction.

My answer would be to push back to the contractor for a justification for any CE and how those costs arise from any action of the Employer where the only need to be on site at all is the correction of defective work.

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Is there a specific clause or clauses where the contract states words to the effect that "The Contractor has no right to any payment for correcting a defect after Completion. All of the rectification costs are to be met by the Contractor."?

I should clarify, when correcting some of the defects the Contractor also completed a minor piece of the original scope (0.3% of the total of the Prices). Unsure if this was in the 2016 or 2018 visit, assume 2016. Does this change anything?

The defect correction period was 4 weeks, the defects were not corrected within this period. The Contractors account states that access to the asset was offered in mid June 2016 (at short notice), but their sub-contractors could not be mobilised in time to take advantage of the window where the asset would not be in use.

Another side note, the Contractor advise that they undertook some ‘additional repairs’, acknowledging that they did so without an instruction from the PM. Advising that the ‘additional repairs’ had to be undertaken in order to facilitate correction of the defects. Although believe this is simple one to resolve (i.e. not a Compensation Event as it was not instructed by the PM).

This depends slightly on the main option used. What version do the contract are you using? Eg NEC3 ECC Option C?

Apologies, should have mentioned NEC3 ECC Option A

Under Option A the Contractor is responsible for the cost of correcting a defect at any time.

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