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What does NEC4 clause 60.1(18) mean?

It makes a breach of contract by the Client, or on a subcontract your main contractor, a compensation event if no other one covers it.

Updated: . By Jack Butler-Kettle, Construction Claims Consultant.

The answer

It is the sweep-up event for the other side's defaults. Its purpose is to keep those breaches inside the contract's own procedure. The breach is notified, quoted and assessed like any other event. The 8-week bar, the decision under clause 61.4 and the Defined Cost basis all apply. To rely on the clause, show three things. First, an obligation in the contract, meaning the conditions, the Contract Data or the Scope, not a general hope of cooperation. Second, that the Client itself failed to meet it, not the Project Manager, the Supervisor or Others. On a subcontract, that is your main contractor. Third, that the failure is not already one of the other compensation events. If it is, that paragraph applies instead. So this clause only catches what the others leave. Examples are failing to give a consent only the other side can give, or to keep up an insurance the contract requires it to hold. Notify under clause 61.3 within 8 weeks of becoming aware of the breach. The change to the Prices, your contract price, is assessed under clause 63.1. It is the effect on actual Defined Cost up to the notification and forecast Defined Cost after it, plus the Fee. It is a cost-based assessment, not damages, so loss of profit on other work and similar items do not come in. Two things go wrong most. Something the Project Manager did is described as a Client breach, when those failures have their own paragraphs. Or the breach is notified in general terms, without naming the obligation broken. Any delay to the Completion Date is assessed separately under clause 63, and that is a job for your planner.

Example

Illustrative example. The scenario and figures are invented.

The facts

A structural steel subcontractor's subcontract requires the main contractor to insure the works and show a certificate on request. The main contractor's policy lapses for a period, and it cannot produce a certificate.

What happens

  1. Rather than work uninsured, the subcontractor buys short-term cover for the same risks and period, with the main contractor's knowledge.
  2. Failing to keep the insurance up breaches the main contractor's obligation, and is not one of the other compensation events. So the subcontractor notifies a compensation event under clause 61.3.
  3. The main contractor's admission and the broker's confirmation are attached.
  4. The quotation assesses the £3,940 premium as the effect on Defined Cost, under clause 63.1, with the Fee at the Contract Data percentage.

The outcome

The subcontractor claims the £3,940 premium plus the Fee, and nothing for the general inconvenience of the lapse, because that is not a cost.

To have a refused event tested against the clause it falls under and pressed to implementation, see our Compensation Event Claim service.