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Can Delay Damages Apply While Compensation Events Are Unresolved?

Yes, on the wording of the contract, delay damages can apply while open compensation events are unresolved. The Completion Date only changes when an event is implemented, so until then damages run from the date as it stands. If the date later moves, X7.2 requires the overpayment to be repaid with interest.

What decides the outcome is how far each event has got, and how fast it can be closed. Holding them open helps neither side: the Contractor carries the cash, and the Client builds up an interest bill. This page follows the NEC4 Engineering and Construction Contract (ECC), and X7 has the same numbering in NEC3. It belongs with our NEC questions answered.

Where is each event stuck?

StageWho should act, and in what timeThe Contractor's route if nothing happens
Not notifiedContractor: eight weeks from becoming aware (61.3)None if the bar applies. So notify today
Notified, no decisionProject Manager: one week (61.4)Notify the failure. Two more weeks of silence and it is treated as accepted (61.4)
Quotation dueContractor: three weeks from the instruction (62.3)If you don't quote, the Project Manager can assess (64.1). So quote
Quotation submitted, no replyProject Manager: two weeks (62.3)Notify the failure. Two more weeks and it is treated as accepted (62.6)
Project Manager assessingThe time allowed for a quotation (64.3)Notify the failure. Two more weeks and the quotation is treated as accepted if one is in (64.4)
ImplementedCompleted. The Completion Date has changedCheck that the next certificate uses the new date

The treated-acceptance steps are what make this practical. A Contractor with a quotation showing delay can turn silence into a changed date within a known time. See when the PM ignores a quotation.

What repayment looks like

A fictional contract with illustrative figures: damages of £1,500 a day, a Completion Date of 1 March and Completion on 31 March. An open event, notified in February, is implemented in June and moves the date by 12 days.

ItemAmount
Damages taken for 30 days£45,000
Damages properly due for 18 days£27,000
Repaid under X7.2£18,000
InterestAt the Contract Data rate, for the time between the money being paid and it being returned

The repayment date is also an assessment date, so it runs through normal payment. Keep a note of the dates on which each deduction was actually paid, since that is where interest starts. The guide to delay damages in the payment cycle covers the wider mechanics.

If you are the Contractor

  1. Build a table of every event that affects planned Completion, its stage and the time it claims.
  2. Close the ones in your hands first. A Project Manager can't accept a quotation you haven't sent.
  3. Use the failure notices when replies are overdue. They are a contract step, not an act of hostility.
  4. Challenge the deduction itself if it has other errors, using the checks in delay damages deducted.
  5. Think about adjudication if the sums are affecting your cash. Under Option W2 it is available at any time, and a Party can ask for the time to be decided. Under W1, the limits are tighter.

If you are the Project Manager or Client

The contract doesn't require you to stop deducting. But an assessment within the contract's time limits is your duty, and sitting on events while taking damages looks bad before any Adjudicator. Set a target to clear everything that affects the end date before the Completion Date passes. Where effects are unclear, 61.6 lets you state assumptions, so uncertainty isn't a good reason to wait.

What the other side will say

  • Contractor: "You can't take damages until the events are done." The contract doesn't say that. The stronger arguments are the Project Manager's overdue replies and the delay the events actually caused.
  • Client: "It's not implemented, so it doesn't count." True for today, not for the final position. Budget for the repayment and interest.
  • Project Manager: "It's a global delay, not this event." Time is assessed event by event against whichever Accepted Programme applied at the dividing date (63.5).

When the job ends with events still open

Completion doesn't close events. They can still be implemented later, moving the date backwards and producing a repayment. There are limits to notifying them, though, so see a project that ended with open events, and take advice if large sums are involved.

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.