NEC3
The Standard Forms of Contract

© Daniel Atkinson 2008 03 February 2008

General Introduction

The term “construction contract” in this series of articles on the NEC3 refers to any binding contract for an enterprise which involves the design and/or construction of buildings or any engineering works intended to be fixed to land.

Standard forms of contract are regularly used for construction projects. Understanding the standard forms is important to the proper and effective management of the contract and in deciding the obligations, rights and remedies of the parties.

The standard forms in use tend to reflect the needs and practices of the particular part of the construction industry in which they are used. They are developed and promoted by bodies for their members in the specialist industry. Many of the standard forms have been in use for years and have been amended following use and experience and to reflect the changing needs of the specialist industry.

Standard Forms in common use are in alphabetical order:

1. FIDIC Red Book 1st Edition 1999 published by the Federation Internationale des Ingenieurs-Conseils for use on building and engineering works designed by the Employer and intended to be for international application.
2. ICE 7th Edition Measurement Version published for and approved by the Institution of Civil Engineers, the Association of Consulting Engineers and the Civil Engineering Contractor’s Association and is used in connection with works of civil engineering construction.
3. IChemE 4th Edition 2001 Lump Sum (The Red Book) published by the Institution of Chemical Engineers and are used for any process plant not only chemical processes.
4. JCT 2005 SBC/Q published for the Joint Contracts Tribunal Limited and is used extensively in the UK building industry.
5. MF1 (Rev 4) 2000 Edition published by for the Joint IMechE/IEE committee on Model Forms of General Conditions of Contract by the Institution of Electrical Engineers and used for the supply and erection of electrical, electronic or mechanical plant.

The effect of the introduction of the New Engineering Contract, abbreviated to NEC, has been to increase the number of standard forms of contract in the NEC family with each edition. Other published standard forms, such as the FIDIC, IChemE and JCT, forms, have been developed into a “family” of forms to deal with different contracting situations, following the approach in the NEC.

There are now more standard forms than ever before.

The New Engineering Contract comprises several possible standard forms of contract. In common with other standard forms the NEC family of forms states the contractual responsibilities of the parties and allocates and apportions risk.

In common with other standard forms the NEC forms prescribe procedures which define the management approach intended to be adopted in the construction enterprise.

The introduction of the NEC Form has increased training in commercial management in projects. Also it has encouraged the adoption of construction management based on programmes.

It is by no means clear whether the cost of construction of projects carried out adopting the NEC Form has reduced compared to other standard forms, or that delays in completion are reduced by use of the NEC Form.

It is also not clear whether the effect of the use of the NEC form is to reduce the incidence of disputes, although the author has been involved in a considerable number of adjudications under the NEC Forms.

Although promoted as adopting simple and clear language, that has not led to clear and precise identification of the obligations, rights and remedies of the Parties to an NEC contract. In that important respect, the NEC forms are not easy to understand.

The form has not been accepted as a sufficiently comprehensive and complete form of contract and in practice extensive use is made of additional clauses in Option Z.

The series of articles attempts to identify the obligations, rights and remedies of the Parties under the two most common construction forms, ECC and ECS. The basic legal principles in English Law which apply to each issue are summarised.

Abbreviations and Conventions

The three editions of the NEC are distinguished by the suffix 1, 2 or 3. Only NEC3 is examined in detail in these Articles.

NEC3 comprises the following standard forms of contract with the following prefixes:

Where the context requires the terms of an NEC form to be distinguished, the above prefix for the NEC Form is adopted. This approach allows for example the ECC Contractor to be distinguished from the ECS Contractor and the PCS Employer, although they may be the same legal entity.

A distinction is made in the Articles between “Core Clauses” and “Main Option Clauses” using the abbreviations “CC” and the “MO” respectively.

Paragraphs of the Schedule of Cost Components are referred to by the abbreviation “SCC” and those of the Shorter Schedule of Cost Components by “SSCC”.

The clauses of the other options are already identified in the NEC3 Form by a prefix such as “W2” or “X14”and that convention is also adopted.

The NEC3 ECC terms are examined in detail. The latin term "mutatis mutandis" is used to indicate that the same reasoning and conclusion for the ECC term applies to the ECS term, with the following substitutions:

ECS Contractor substituted for ECC Employer, and

ECS Subcontractor substituted for ECC Contractor,

ECS Contractor substituted for ECC Project Manager and Supervisor and

ECS subcontract substituted for ECC contract.

The other relevant differences between ECC and ECS are expressly stated.

The terms of the other NEC3 forms are only examined in relation to the NEC3 ECC and ECS.

The NEC3 uses the convention of marking terms defined by the Parties in the document “Contract Data” by the font italics and of identifying terms defined in the conditions of contract by use of Capital Initials. That convention has been adopted in the articles.