The NEC suite provides for amendments to be made by the inclusion of bespoke additional conditions of contract, known as Z clauses. However, the drafters of the NEC discourage excessive amendments.
The NEC guidance notes state that such clauses should only be used when 'absolutely necessary to accommodate special needs, such as those particular to the country in which the work is to be done'.
Nevertheless, NEC contracts are often in practice excessively amended. While some amendments are made sensibly, others undoubtedly cause problems.
Sensible amendments tailor contract to project
Some common Z clauses are unlikely to be too controversial. For example, NEC3 does not include any confidentiality obligations, so terms that suit the requirements of a project are therefore often added by practitioners.
In contrast, NEC4 does require that information obtained in connection with works be kept confidential under clause 29; but those provisions are limited.
Users of NEC4 might therefore amend clause 29 sensibly to allow expressly for disclosure of information to relevant third parties such as professional advisers, including lawyers, or subcontractors.
Another common – and likely uncontroversial – amendment is to set out a hierarchy of contract documents in the event of any inconsistency between them.
This might be done through a Z clause, or otherwise as a point in the form of agreement that incorporates the NEC contract.
These sorts of amendment are often necessary to tailor the contract to the particular project. Provided that the terminology and language used is consistent with the rest of the contract, such amendments are likely to help rather than hinder.
Lack of clarity or consistency causes problems
By contrast, one area that we often see become convoluted is the dispute resolution provisions. In NEC, the dispute resolution provisions that apply depend on which of the W options is selected.
Under NEC4, option W1 is used where the parties agree a contractual right to adjudicate, option W2 where there is a statutory right to adjudicate, and option W3 where there is no right to adjudicator and the parties agree to use a Dispute Avoidance Board.
In our experience, it is not uncommon for further amendments to be made in the form of Z clauses – and unfortunately, this can mean the procedure becomes muddled.
There is ample case law to illustrate the problem. One example is Ecovision Systems Ltd v Vinci Construction UK Ltd (Rev 1) [2015] EWHC 587 (TCC). In this case, unclear drafting meant there was uncertainty as to which of three competing dispute resolution regimes might apply.
As a result, it was unclear which adjudication rules applied, and how an adjudicator could be appointed. Getting this wrong can have significant consequences, as it may potentially cause the adjudicator to lack jurisdiction.
An adjudication went ahead, but the court found that the adjudicator had applied the incorrect rules and accordingly lacked jurisdiction. As a result, the adjudication decision was unenforceable.
A similar issue arose in Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2015] EWHC 2915 (TCC), where it was unclear which contrary sets of adjudication provisions applied. On that occasion – after examination of the contractual provisions – the court found that the adjudicator did have jurisdiction.
In both cases, the parties will have incurred extra costs and wasted time due to the muddled provisions of their contracts.
'In our experience, it is not uncommon for further amendments to be made in the form of Z clauses – and unfortunately, this can mean the procedure becomes muddled'
Alternative contract preferable to material change
Another issue can arise from the fact that the NEC suite stands apart from other standard-form contracts for its focus on proactive project management, as well as the promotion of cooperation between the parties.
There might be scenarios where – for whatever reason – the suite's approach is not right for the project. In those instances, it may be preferable to select an alternative contract than to make extensive amendments.
Where parties materially alter the defined roles set out in the NEC – particularly those of project manager and supervisor – this can change the ethos of the contract. We have seen instances of amendment that entirely removed the role of supervisor, for instance.
Although this may be entirely appropriate for a particular project, as with any major series of amendments it immediately introduces the risk that something will be missed – perhaps in this case that the duties of the supervisor are not adequately reassigned, and the parties are left to work out who in practice bears responsibility. The potential for disputes is immediately increased.
Another way in which the ethos of the NEC might be materially changed is where parties extensively change the risk allocation provided by the contract.
These changes might be clear to see; for example, amendments to the list of compensation events. But other changes can significantly change the risk allocation without being quite so obvious.
Examples of the latter may include:
- amending the early warning procedure to require very early notification of any circumstances that might later give rise to a compensation event
- creating particularly strict notification requirements, e.g. requiring a contractor to use a complicated or detailed form of notification
- enabling the employer to change the access requirements, including instructions to stop work at any time.
The contractor might find itself subject to a far more onerous contract than it had expected, and this would immediately increase the potential for disputes.
These clauses depart from the underlying philosophy of NEC, which is of mutual trust and cooperation.
The NEC drafters point out that careful consideration has been given to balancing the risk borne by Contractor and Employer, and they are keen to dissuade users of the suite from attempting to shift that dial.
Irrelevant clauses may have unexpected effects
Another issue that can arise is where an employer settles on a set of amendments and seeks to use those across numerous different contracts.
In general terms it is sensible to include broadly equivalent provisions in related contracts, but issues can arise when clauses are carelessly included and they are not directly relevant.
An example might be obligations regarding key dates in contracts where the specified dates are not directly relevant.
At best such provisions will be redundant; at worst, however, they can create liability beyond the parties' expectations when entering into the contract.
Experience can ensure appropriate changes
Amendments will always be made to standard-form contracts by practitioners negotiating large-scale construction projects.
Many of these are entirely appropriate, and necessary to reflect the particular requirements of a project.
Uncertainty arises, though, when the drafting is unclear – and this can have costly consequences.
Therefore, amendments to the NEC contracts should only be made by practitioners who have experience of dealing with the suite, who can envisage the effect these will have.