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Can a Contractor Terminate an NEC Contract?

Yes, but only for a reason in the Termination Table. A contractor can terminate an NEC contract for the Client's insolvency, a long non-payment, a long stop instruction, or a legal release from the contract, and for nothing else under the contract's own terms.

Poor decisions, slow replies or a damaged relationship won't do. Those have other remedies, mostly through compensation events and disputes. Which reason fits decides what you're paid.

The Contractor's reasons

ReasonWhat has to have happenedClausePeriodAmount due
R1 to R10The Client has one of the listed insolvency events, or its equivalent91.1None stated, but see the warning belowA1, A2, A4
R16An amount due is unpaid after it should have been paid91.4NEC4 ECC 13 weeks, NEC3 ECC 11 weeksA1, A2, A4
R17The law has released the Parties from the whole contract91.5NoneA1, A2
R19A stop instruction was due to the Client's default, and there's no restart91.613 weeks in NEC4 ECC and NEC3 ECCA1, A2, A4
R20A stop instruction for any other reason, with no restart. (Not your default)91.613 weeks in NEC4 ECC and NEC3 ECCA1, A2

The NEC4 ECS has its own periods: 13 weeks for R16 and 14 for R19 and R20. Amended contracts may differ, so read your own clause 91 before you act. On all these reasons, you leave the Working Areas and remove your Equipment (P1 and P4).

The warning on insolvency

The contract seems to allow termination if the Client enters an insolvency process, but section 233B of the Insolvency Act 1986 restricts a supplier ending a contract for that reason. A Contractor is usually a supplier to its Client. Read insolvency and NEC contracts and take legal advice first.

Steps before you serve anything

  1. Test the reason. For R16, is the sum really "due"? A sum that the Project Manager hasn't certified may be argued about. Get a clear position first.
  2. Work out the count. It runs from the date of payment or of the instruction, not from your complaint.
  3. Consider suspension first. Under the Construction Act, an unpaid party can suspend performance with notice. Under Y(UK)2, that's a compensation event (Y2.5 in NEC4; Y2.4 in NEC3). It's a less final step.
  4. Price the exit. Set A1, A2 and any A4 against what you'd earn by finishing. Termination can look worse once you've done the sums.
  5. Take legal advice. A wrongful termination is your own breach, and it could lead the Client to treat you as walking off the job.
  6. Notify the Client and the Project Manager, with the reason (90.1).
  7. Wait for the certificate. The Project Manager issues it promptly if the reason complies, and the procedures start after that.

The contract against what happens in practice

The contract says that the procedures only start once the certificate is issued. In practice, a Project Manager appointed by the Client may be slow or may refuse. If that happens, don't just leave. Consider adjudication on whether the reason complies. An Adjudicator can review a Project Manager's inaction under the usual powers, and deciding between adjudication and talks covers the timing.

An example

A fictional NEC3 contract with an interim certificate of £180,000, unpaid since 1 March, with no pay less notice. On 17 May, eleven weeks have passed. Before this, the Contractor gave a suspension notice in April and started adjudication, and it won a decision that the Client didn't honour. It takes advice, notifies R16 and asks for the certificate. The figures and dates are illustrative. With the same facts on NEC4 ECC, it would wait until 13 weeks.

Sample notice

"We notify you and the Project Manager that we wish to terminate under clause 90.1 for reason R16. The amount of £[x] certified on [date] should have been paid by [date] and remains unpaid at the date of this notice, more than [period] later. Please issue a termination certificate."

How the Client may respond

It's likely to pay at the last minute, which removes the reason, or to say the amount wasn't due, or that it has a right to set off. If it counter-notifies your own default, each claim needs its own test. The full list of NEC termination reasons, the long suspension answer and the NEC questions hub go into related detail.

See how this works in practice

Click through Contract Status with sample contracts: raise the notice, reply to it, and watch both sides of one record.

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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.