Under NEC4 EEC Option C, cl.50.7 states where a Contractor makes payment in a currency other than the currency of the contract, it is included in the amount due in the same currency.
Does this mean that the client should be making provision to make payments in different currencies if the Contractor pays for some that is a Defined Cost (e.g. a Subcontractor) that is not in the currency of the contract?
And if the above is correct, what if the client has no ability to pay a foreign currency? Can agreement be made between the Parties to convert the amount into the currency of the contract?
As you have stated, where a payment for Defined Cost is made in a currency other than the currency of the contract, then the payment is made (by the Client under NEC4 ECC) in the same currency. This mechanism applies to main options C and D (clause 50.7) and E and F (clause 50.8).
If a Client has no ability to pay amounts in another currency, then any ‘agreement’, if actioned after the contract date, would need to be a formal variation to the contract, which would effectively amend clause 50.7.
This is a heavily underappreciated aspect of Options C / D / E / F. They are multiple currency Contracts. Options A and B are not, unless you also have X3. Looking a little at the subtleties:
In C/D/E you pay Defined Cost incurred in another currency in that currency. You still pay Fee and any Contractor’s Share (under C and D) in the currency of the contract. You convert using the exchange rates to make the calculation.
The practical implication is that the Client owns the risk of currency fluctuations. If I am drafting an NEC, I will ask the Client whether they are OK with that, because many clients are either unwilling or unable to pay in multiple currencies. Especially if one of the currencies is an unusual one, or you have a supply chain that spans several currencies.
Of course there is the option, if you are the Contractor, of just contracting with your suppliers / subbies in the currency of the contract. Then this doesn’t come up - but might make getting agreement from those suppliers more difficult, as now they own the currency risk.