How does NEC4 clause 51 work?
Under clause 51 each payment is certified within 1 week of the assessment date and paid within 3 weeks of that date, with interest if late.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Every period in clause 51 runs from the assessment date, not from the certificate. In the NEC4 main contract the Project Manager certifies. On an NEC subcontract your main contractor does, and your subcontract may set different periods. Clause 51.1 covers the certificate. The first payment is the amount due. Each later payment is the change in the amount due since the last certificate. So a certificate can even be for a payment back the other way, if the amount due has fallen. Clause 51.2 covers the payment: within 3 weeks of the assessment date, unless the Contract Data states a different period. If a payment is late, interest is paid on the late amount from when it should have been paid until it is. Clause 51.3 covers corrections. If a later certificate corrects an amount due, because of a mistake, a compensation event or a dispute decision, interest is paid on the correction. It runs from the date the wrong amount was certified to the date the correction is certified. The interest rate and how it is worked out are in the contract. Where Option Y(UK)2 applies, the due date, final date and notices under the Housing Grants, Construction and Regeneration Act 1996 sit on top of this clause. Four things go wrong. People count the 3 weeks from the certificate, so a late certificate shortens or stretches the period. A late certificate is treated as putting payment back, when the payment date has not moved. Corrections are certified without the interest clause 51.3 adds. And a Contract Data period other than 3 weeks is missed because nobody read it. Check each certificate against its assessment date.
Example
Illustrative example. The scenario and figures are invented.
The facts
The assessment date falls on a Monday, and the Contract Data leaves the payment period at 3 weeks. The Project Manager certifies on the Friday: an amount due of £272,000 against a previous amount due of £200,000.
What happens
- The certified payment is £72,000, the difference between the two amounts due.
- Payment is due within 3 weeks of the Monday assessment date, not the Friday certificate.
- If payment is a week late, interest runs on £72,000 for that week at the contract's rate.
- If the Project Manager later finds it under-certified £10,000 by mistake, it corrects the amount in a later certificate.
- Interest is paid on the £10,000 from the date of the wrong certificate to the date of the correcting one.
The certificate in figures
| Item | Amount |
|---|---|
| Amount due certified | £272,000 |
| Previous amount due | £200,000 |
| Certified payment | £72,000 |
| Later correction for under-certification | £10,000 |
The outcome
The 3-week payment period runs from the assessment date, and interest follows both a late payment and a corrected under-certification.
Late Payment Prevention counts the certificate and payment periods from each assessment date on your live jobs.