NEC termination reasons are the numbered reasons R1 to R21 in NEC3 and R1 to R22 in NEC4, set out in clause 91. Each one is open to a named Party, and each leads to a particular row in the Termination Table.
The periods differ between forms and editions, so the table below shows the form each one comes from. Amended contracts may differ. See also the wider guide to NEC disputes and termination.
The full list
| Reason | In plain English | Who may use it | Clause |
|---|---|---|---|
| R1 | An individual has applied for bankruptcy (NEC3: presented a petition) | Either | 91.1 |
| R2 | An individual has a bankruptcy order | Either | 91.1 |
| R3 | An individual has a receiver over assets | Either | 91.1 |
| R4 | An individual has an arrangement with creditors | Either | 91.1 |
| R5 | A company or partnership has a winding-up order | Either | 91.1 |
| R6 | A provisional liquidator has been appointed | Either | 91.1 |
| R7 | A resolution for winding-up has passed, other than to amalgamate or reconstruct | Either | 91.1 |
| R8 | An administration order or, in the NEC4 text, an administrator's appointment | Either | 91.1 |
| R9 | A receiver, or similar, over all or a large part of the undertaking or assets | Either | 91.1 |
| R10 | A company or partnership arrangement with creditors | Either | 91.1 |
| R11 | The Contractor has substantially failed to comply with its obligations | Client, after notification and a period | 91.2 |
| R12 | A required bond or guarantee hasn't been provided | Client, as above | 91.2 |
| R13 | A Subcontractor was appointed for substantial work before acceptance | Client, as above | 91.2 |
| R14 | The Contractor has substantially hindered the Client or Others | Client, after notification and a period to stop | 91.3 |
| R15 | The Contractor has substantially broken a health or safety regulation | Client, as above | 91.3 |
| R16 | An amount due hasn't been paid for the stated time | Contractor | 91.4 |
| R17 | The law has released the Parties from further performance of the whole contract | Either | 91.5 |
| R18 | A long stop instruction, due to the Contractor's default | Client | 91.6 |
| R19 | A long stop instruction, due to the Client's default | Contractor | 91.6 |
| R20 | A long stop instruction, for any other reason | Either | 91.6 |
| R21 | An event neither Party could prevent stops or severely delays completion | Client | 91.7 |
| R22 | The Contractor does a Corrupt Act (NEC4 only) | Client | 91.8 |
R1 to R10 apply to the other Party, "or its equivalent". That wording helps cover similar processes under other names or other legal systems. R1 to R10 raise legal issues of their own, which we cover in insolvency and NEC contracts.
The periods
| Period | NEC4 ECC | NEC3 ECC | NEC4 ECS |
|---|---|---|---|
| Put right a default (R11 to R13, 91.2) | 4 weeks from notification | 4 weeks from notification | 3 weeks from notification |
| Stop a default (R14, R15, 91.3) | 4 weeks from notification | 4 weeks from notification | 3 weeks from notification |
| Unpaid amount (R16, 91.4) | 13 weeks after it should have been paid | 11 weeks after it should have been paid | 13 weeks after it should have been paid |
| Stop instruction (R18 to R20, 91.6) | 13 weeks | 13 weeks | 14 weeks |
| Event: forecast delay to Completion (R21, 91.7) | More than 13 weeks | More than 13 weeks | More than 13 weeks |
Reading some reasons closely
R11 is about substance
"Substantially failed" isn't a low bar. A single missed date probably won't do. A pattern of ignoring a safety-critical part of the Scope might. The Project Manager needs to notify the default clearly, and the period then starts. After the period, the Client may terminate if the default hasn't been put right.
R16 has a date to count from
The clock counts from when the amount should have been paid. It doesn't begin at the date of a dispute. An amount the Project Manager hasn't certified may be argued about, so a Contractor should check whether the amount really is "due" under the contract.
R21 is narrow
The tests mirror the prevention event: 60.1(19). Only the Client can use it. Our guide to force majeure and NEC explains how these fit together.
R22 has a defence for the supply chain
A Corrupt Act done by a Subcontractor or supplier doesn't count against the Contractor if it wasn't aware and shouldn't have been, or if, once it knew, it told the Client and took steps to end it.
An example: running R12
A fictional Contractor was required to give a performance bond under Option X13, but hasn't. On NEC3, the Project Manager notifies the default on 3 June. Four weeks on, on 1 July, there's still no bond. The Employer may then notify termination for R12. The Project Manager checks the dates, and issues the certificate. P1, P2 and P3 then apply, with A1 and A3 for the money. Illustrative only.
The right to terminate isn't compulsory. Clients often use the threat as a way to bring things to a head.
Related guides
- NEC Disputes and Termination
- Termination Procedures
- Payment on Termination
- What Changed in NEC4 Termination
- Avoiding Disputes on NEC Contracts
- Termination Under NEC
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