It depends on why the Client wants out. If the Contractor is in default or insolvent, the Client can use a listed reason; if it's a Client decision such as a funding change, a client can terminate under NEC4 only if Option X11 is in the contract, while NEC3 gives the Employer that right as standard.
The reason also sets the bill. Terminating for the Client's own reasons adds a fee on the unearned work, and a default route takes off the forecast cost of completing the job. So choosing the reason comes first.
The routes side by side
| Route | Reason | Preconditions | Amount due |
|---|---|---|---|
| Contractor's default | R11 to R13 (91.2), R14 and R15 (91.3) | Project Manager notifies the default, and the stated period passes. It's four weeks in the NEC3 and NEC4 ECC, and three in the NEC4 subcontract | A1, A3 |
| Contractor's insolvency | R1 to R10 (91.1) | A listed event has happened. See contractor insolvency | A1, A3 |
| Corrupt Act (NEC4 only) | R22 (91.8) | The stated test, with a defence for some acts down the supply chain | A1, A3 |
| Long stop due to the Contractor's default | R18 (91.6) | Instruction with no restart for 13 weeks in the NEC4 ECC and NEC3 ECC, 14 in the NEC4 ECS | A1, A3 |
| Long stop for another reason, or the law releases the Parties | R20 (91.6), R17 (91.5) | R20: as for R18. R17: the law releases the Parties, with no waiting period | A1, A2 |
| An event neither Party could prevent | R21 (91.7) | Stops the work, or forecasts a delay of more than 13 weeks, and passes the unlikelihood test | A1, A2 |
| Client's own reasons | X11 in NEC4; a core right in NEC3 (90.2) | Nothing beyond notification | A1, A2, A4 |
Without X11 under NEC4, a Client wanting to leave for its own reasons has no row to use in the Table. Take legal advice before notifying in that situation. Our guide to Option X11 covers how it works.
Steps if you decide to go ahead
- Identify the reason and test each precondition against dated evidence.
- Take legal advice. A notice on a poor reason can be treated as the Client's own breach.
- Check the contract and any bond or guarantee. A bond call has its own terms and deadlines.
- Notify the Contractor and the Project Manager, with the reason (90.1).
- The Project Manager certifies promptly if the reason complies. The procedures then start, and the Contractor does no further work.
- Follow through on the Table. P1 to P4 set out who stays and who leaves: see termination procedures.
- Diarise the final assessment. Under NEC4, it's made under 53.1 within 13 weeks of the certificate in the ECC (14 in the subcontract).
What the own-reasons route costs: an illustration
A fictional Option A contract with Prices totalling £2,000,000 when it was signed, and a fee percentage of 10%. At termination, the Price for Work Done to Date stands at £800,000. A4 is 10% of the £1,200,000 unearned balance, which is £120,000. That's on top of A1, the amount for work done and related Defined Cost, and A2, the cost of removing Equipment. On a default route, by contrast, there'd be no fee and A3 would take off the forecast extra cost. The figures are only to show the shape of the calculation. Note A4 is worded differently for Options E and F, so read your own.
Options short of termination
- Omit the work. A 14.3 instruction taking part out of the Scope is a compensation event. This can suit a smaller project, but take advice before removing work just to give it to someone else: see omitting work.
- Pause it. A 34.1 stop instruction buys time for a decision, as a compensation event. It can later support R20 for either Party.
- Press the default. Notifying a default can produce a recovery plan, and a Client may never need to go further.
- Negotiate an exit. Parties can agree to end on their own terms, written up carefully.
What the Contractor will say
It's likely to dispute the default, say the notified period hasn't run, or claim that the true reason is a Client decision, which would bring in A4. It can refer those issues to adjudication, and the Project Manager's certificate can be reviewed too. Project Managers should test the reason independently, rather than certifying because the Client has asked. More on the overall process is in NEC termination explained, and related answers are in the NEC questions hub.
Related guides
- NEC Questions Answered: Real Situations on Site
- Can a Contractor Terminate an NEC Contract?
- Our Contractor Has Gone Insolvent: What Does the Client Do?
- The Client Is in Breach but No Event Fits: Is There a Remedy?
- The PM Told Us to Stop Work: What Should We Do?
- The Work Has Been Suspended for Months: Can We Terminate?
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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.