NEC termination ends the Contractor's duty to carry on with the work, and it happens through a fixed process: a Party notifies its reason, the Project Manager issues a termination certificate if the reason complies, and the Termination Table then sets the procedures and the amount due. It's in Section 9 of the contract (clauses 90 to 93).
It isn't an instant walk-off, and the reason chosen drives the money. This page explains the process and the table. It's part of NEC disputes and termination.
The process
- Notice. The terminating Party tells both the Project Manager and the other Party, and says why (90.1).
- Certificate. If the reason is one the contract allows, the Project Manager promptly certifies termination to both Parties (90.1).
- Procedures. They apply straight after the certificate.
- No further work. The Contractor does no further work needed to Provide the Works.
- Payment. The amount due on termination is assessed. Under NEC4 this is through the final assessment at clause 53.
The Termination Table
The table below shows the NEC3 ECC table, and the NEC4 table as it appears in the subcontract text with the 2019 amendments. The NEC4 ECC follows this structure without R23. The contract you hold could differ, particularly for R17 and R20, so read its table before relying on this one.
| Terminating Party | Reason | NEC3 ECC procedures and amounts | NEC4 subcontract text procedures and amounts |
|---|---|---|---|
| Paying party | Any other reason | P1, P2; A1, A2, A4 | Only with Option X11: P1, P2; A1, A2, A4 |
| Paying party | R1 to R15 or R18 (and R22 in NEC4) | P1, P2, P3; A1, A3 | P1, P2, P3; A1, A3 |
| Paying party | R17 or R20 | P1, P3; A1, A2 | P1, P4; A1, A2 |
| Paying party | R21 | P1, P4; A1, A2 | P1, P4; A1, A2 |
| Contractor or Subcontractor | R1 to R10, R16 or R19 | P1, P4; A1, A2, A4 | P1, P4; A1, A2, A4 |
| Contractor or Subcontractor | R17 or R20 | P1, P4; A1, A2 | P1, P4; A1, A2 |
The separate pages explain the reasons, the procedures and the amounts due.
How to read the table
Each row reflects fault. Where the Contractor is at fault, the Client can keep control of its Equipment, get the benefit of its subcontracts, and deduct the forecast extra cost of finishing (A3). Where the Client is at fault, the Contractor leaves with its Equipment, and it recovers its removal cost (A2) and a fee on the unfinished work (A4). Where neither is at fault, the Contractor recovers cost and removal, but no fee.
What stops and what carries on
| Stops | Carries on |
|---|---|
| The Contractor's work to Provide the Works | Liabilities for what's already been done |
| Delay damages, once a termination certificate is issued, under NEC4 as amended in October 2020 (X7.1) | The right to refer a dispute |
| Insurance cover in the Table, at the certificate | Rules on Defects for finished work, subject to advice |
| Normal programme and assessment cycle | The Client's and Contractor's payment rights on termination |
Checks before serving notice
- Which reason applies? Each has its own preconditions, such as a prior notification and a period to fix it.
- Is the evidence good enough? Would it persuade an Adjudicator?
- Who has been told? Notice goes to the Project Manager as well as the other Party.
- What will it cost? Work out the likely amount due under each scenario, including the risk of being wrong.
- What about others? Banks, bondsmen, insurers and subcontractors may need to be told. Check bond and guarantee terms.
- What happens next on site? Security, safety, access and handover records.
- Have you taken advice? A wrongful termination can itself be a serious breach of contract.
A note for Project Managers
The certificate isn't a formality. The clause asks whether the reason complies with the contract, so look at the evidence and the preconditions. Issue the certificate promptly, if it does comply. Don't let the Client's commercial pressure change your judgement, because a dispute may follow, and your decision may be reviewed. If the reason doesn't comply, explain why.
A short example
A fictional Contractor on Option B hasn't been paid an amount due for a long time. It checks the R16 period in its contract, confirms the date the amount should have been paid, and notifies the Client and the Project Manager, giving R16 as the reason. The Project Manager checks the dates and issues the certificate. The Contractor leaves the Working Areas with its Equipment and is entitled to A1, A2 and A4. Illustrative only: before going this far, Y(UK)2 and any rights to suspend performance are worth considering. See Y(UK)2.
Related guides
- NEC Disputes and Termination
- Reasons for Termination
- Termination Procedures
- Payment on Termination
- The Tribunal
- Avoiding Disputes on NEC Contracts
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This guide is general information in our own words, not legal advice. Your contract and its Contract Data always govern. NEC, NEC3 and NEC4 are trade marks of Thomas Telford Ltd; Contract Status is not affiliated with or endorsed by NEC.