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The NEC 3 Engineering and Construction Contract: A Commentary, 2nd Edition

ISBN: 978-1-4051-7282-0
392 pages
April 2008, Wiley-Blackwell
The NEC 3 Engineering and Construction Contract: A Commentary, 2nd Edition (1405172827) cover image

Description

Now Available in Paperback

From its launch in 1991 the New Engineering Contract has rapidly overtaken traditional building and civil engineering contracts to become the UK's leading standard form for major construction projects. Additionally, under the generic title NEC 3, there is now a family of New Engineering Contract standard forms.

This book provides a detailed commentary on the latest edition of the main form - NEC 3 Engineering and Construction Contract. It explains how the contract is intended to operate and examines each clause to consider its application and legal interpretation. It draws upon the author's successful book on the second edition of the Engineering and Construction Contract, ECC 2, and it identifies and comments on the changes between ECC 2 and NEC 3.

Particular attention is given to the revised compensation event procedures in NEC3, with five chapters of the book devoted to this subject. In-depth analysis is also given to:

  • The role of the project manager
  • The obligations of the parties
  • The liabilities of the parties
  • The revised dispute resolution procedures
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Table of Contents

Preface xi

Author’s note xiii

1 Introduction 1

1.1 Development of NEC contracts 1

1.2 Characteristics of NEC contracts 2

1.3 Structure of the NEC 3 Engineering and Construction Contract 4

1.4 Feedback from ECC 2 5

1.5 Changes from ECC 2 6

1.6 Points of interest in NEC 3 7

2 Main options 11

2.1 Introduction 11

2.2 Contract strategy 12

2.3 Option A – priced contract with activity schedule 18

2.4 Option B – priced contract with bill of quantities 21

2.5 Target contracts generally 22

2.6 Options C and D – target contracts 25

2.7 Option E – cost reimbursable contract 26

2.8 Option F – management contract 27

2.9 Option W1 – dispute resolution 27

2.10 Option W2 – dispute resolution 28

3 Secondary option clauses 30

3.1 Introduction 30

3.2 Option X1 – price adjustment for inflation 32

3.3 Option X2 – changes in the law 32

3.4 Option X3 – multiple currencies 33

3.5 Option X4 – parent company guarantee 34

3.6 Option X5 – sectional completion 35

3.7 Option X6 – bonus for early completion 36

3.8 Option X7 – delay damages 37

3.9 Option X12 – partnering 42

3.10 Option X13 – performance bond 44

3.11 Option X14 – advanced payment to the contractor 45

3.12 Option X15 – limitation of contractor’s liability for design 47

3.13 Option X16 – retention 48

3.14 Option X17 – low performance damages 50

3.15 Option X18 – limitation of liability 51

3.16 Option X20 – key performance indicators 54

3.17 Option Y(UK)2 – Housing Grants, Construction and Regeneration Act 1996 55

3.18 Option Y(UK)3 – Contracts (Rights of Third Parties) Act 1999 56

3.19 Option Z1 – additional conditions 56

4 Contract documents 58

4.1 Introduction 58

4.2 Entire agreements 59

4.3 Clause 12.4 of NEC 3 60

4.4 Construction of contracts generally 60

4.5 NEC 3 documentation 61

4.6 Essential contract documents 62

4.7 Identified and defined terms 64

4.8 The contract date 64

4.9 Works information 66

4.10 Site information 69

4.11 Contract data 71

4.12 Schedules of cost components 71

4.13 Ambiguities and inconsistencies in the contract documents 74

4.14 Schedule of clauses referring to the works information 75

5 Key players 79

5.1 Introduction 79

5.2 Others 81

5.3 Actions 82

5.4 The employer 85

5.5 Express obligations of the employer 86

5.6 The project manager 87

5.7 Express duties of the project manager 90

5.8 The supervisor 94

5.9 Express duties of the supervisor 95

5.10 Communications 95

5.11 The project manager and the supervisor 100

6 General core clauses 102

6.1 Introduction 102

6.2 Actions 103

6.3 Identified and defined terms 103

6.4 Interpretation and the law 113

6.5 Communications etc. 115

6.6 Instructions 115

6.7 Adding to the working areas 115

6.8 Early warning 116

6.9 Ambiguities and inconsistencies 119

6.10 Illegal and impossible requirements 120

6.11 Prevention 121

7 Obligations and responsibilities of the contractor 126

7.1 Introduction 126

7.2 Design obligations, responsibilities and liabilities 129

7.3 Providing the works 131

7.4 The contractor’s design 133

7.5 Using the contractor’s design 136

7.6 Design of equipment 136

7.7 People 137

7.8 Working with the employer and others 138

7.9 Subcontracting 140

7.10 Other responsibilities 143

7.11 Express obligations of the contractor 145

7.12 Express prohibitions on the contractor 149

8 Time (and related matters) 151

8.1 Introduction 151

8.2 Starting and completion 154

8.3 Programmes 156

8.4 Revision of programmes 159

8.5 Shortened programmes 161

8.6 Access to and use of the site 162

8.7 Instructions to stop or not to start work 163

8.8 Take-over 165

8.9 Acceleration 167

9 Testing and defects 170

9.1 Introduction 170

9.2 Definitions and certificates 173

9.3 Tests and inspections 177

9.4 Testing and inspection before delivery 179

9.5 Searching and notifying defects 180

9.6 Correcting defects 182

9.7 Accepting defects 184

9.8 Uncorrected defects 185

10 Payments 188

10.1 Introduction 188

10.2 Assessing the amount due 191

10.3 Payments 194

10.4 Defined cost 197

10.5 Payments – main option A 197

10.6 Payments – main option B 201

10.7 Payments – main option C 202

10.8 Payments – main option D 207

10.9 Payments – main option E 207

10.10 Payments – main option F 208

11 NEC 3 compensation event schemes 210

11.1 Introduction 210

11.2 Changes in NEC 3 (from ECC 2) 212

11.3 Outline of procedures 216

11.4 Defining a compensation event 217

11.5 Compensation events as exclusive remedies 217

11.6 Fairness of the compensation event procedures 218

11.7 Unusual features of the compensation event procedures 219

12 Listed compensation events 220

12.1 Introduction 220

12.2 Omissions from the listed events 221

12.3 Works information related events 221

12.4 Employer’s default events 224

12.5 Employer’s risk events 226

12.6 Project manager/supervisor related events 227

12.7 Physical conditions 231

12.8 Adverse weather 234

12.9 Prevention 235

12.10 Measurement related events 236

12.11 Secondary option clause events 238

13 Notifying compensation events 241

13.1 Introduction 241

13.2 Notifications by the project manager 242

13.3 Notifications by the contractor 244

13.4 Project manager’s response to notifications 248

13.5 Last date for notification of compensation events 251

14 Quotations for compensation events 253

14.1 Introduction 253

14.2 Instructions to submit quotations 256

14.3 Instructions for alternative quotations 259

14.4 Submission of quotations 260

14.5 Status of the contractor’s quotations 262

15 Assessment of compensation events 265

15.1 Introduction 265

15.2 Changes from ECC 2 266

15.3 General assessment rules 267

15.4 Particular assessment rules 274

15.5 The project manager’s assessments 278

15.6 Implementing compensation events 280

15.7 Other financial remedies 281

16 Title 283

16.1 Introduction 283

16.2 Employer’s title to equipment, plant and materials 284

16.3 Marking equipment, plant and materials 285

16.4 Removing equipment 285

16.5 Objects and materials within the site 286

17 Risks and insurances 288

17.1 Introduction 288

17.2 Employer’s risks 292

17.3 Contractor’s risks 295

17.4 Repairs 296

17.5 Indemnity 296

17.6 Insurance cover 296

17.7 Insurance policies 297

17.8 Contractor’s failure to insure 298

17.9 Insurance by the employer 298

18 Termination 300

18.1 Introduction 300

18.2 Summary of NEC 3 termination provisions 304

18.3 Termination for ‘any reason’ 305

18.4 Termination under section 9 306

18.5 Reasons for termination 308

18.6 Procedures on termination 312

18.7 Amounts due on termination 313

19 Dispute resolution 315

19.1 Introduction 315

19.2 Developments in dispute resolution 316

19.3 Meaning of dispute 317

19.4 Adjudication under Option W1 319

19.5 Adjudication under Option W2 329

19.6 Review by the tribunal 333

19.7 The Adjudicator’s Contract 336

20 NEC 3 Engineering and Construction Subcontract 337

20.1 Introduction 337

20.2 Core clauses – general 339

20.3 Core clauses – the subcontractor’s main responsibilities 340

20.4 Core clauses – time 340

20.5 Core clauses – testing and defects 341

20.6 Core clauses – payment 341

20.7 Core – compensation events 342

20.8 Core clauses – title 343

20.9 Core clauses – risks and insurance 343

20.10 Core clauses – termination 343

20.11 Dispute resolution 344

21 NEC 3 family of contracts 345

21.1 The contracts 345

21.2 NEC 3 Short Contract and Short Subcontract 346

21.3 NEC 3 Term Service Contract 348

21.4 NEC 3 Framework Contract 352

21.5 NEC 3 Professional Services Contract 352

21.6 NEC 3 Adjudicator’s Contract 354

21.7 Concluding comment 354

Table of cases 355

Table of clause references 359

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Author Information

Brian Eggleston, CEng, FICE, FIStructE, FCIArb is a registered arbitrator
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The Wiley Advantage


  • NEC3 has become the leading standard form for major construction projects.
  • Examines the new contract clause by clause and compares it with the previous edition.
  • Written by a highly regarded contracts commentator and experienced arbitrator and adjudicator.
  • 'Those who pride themselves on a comprehensive law library will buy this book straightaway.' - Construction Industry Law Letter
  • Previous edition published under the title The New Engineering Contract (PB 0-632-05742-4, HB 0-632-04065-3).
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Reviews

‘Eggleston is the author of a number of highly successful guides to engineering contracts […] he writes with a certainty and facility that commends him to many practising lawyers and with an ease which makes him highly readable for other construction professionals. Given its readability and perceptiveness, Eggleston can be thoroughly recommended to all construction professionals.’ – Paul Newman, Construction Law


‘A very useful and helpful guide.’ – Fiona Hammond, Legal Advisor, BAA plc


‘Brian Eggleston’s books are always good. This one is unique, as the only analysis on this contract that is both detailed and fair. The light it shines is startlingly revealing.’ – Robert Fenwick Elliott, Fenwick Elliott, Solicitors


'Those who pride themselves on a comprehensive law library will buy this book straightaway. Others would be well advised to buy it as soon as they are faced with the prospect of an NEC project.' - Construction Industry Law Letter

'everyone involved in projects using the NEC should have a copy' Building Magazine

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