It depends on whether Option X2 is in your contract. With X2, a change in law after the Contract Date is a compensation event, so the Client pays; without it, the Contractor usually carries the cost unless the new rule forces a change to the Client's own Scope.
Three more facts decide the rest: when the change took effect, whose country's law it is, and who owns the design affected. The rules below are the NEC4 ECC, and X2.1 has the same number in NEC3. See NEC questions answered for other situations.
What to do now
- Warn straight away. Give an early warning under 15.1 (NEC3 16.1) if the change could raise the Prices or delay Completion.
- Check the Contract Data. Is Option X2 selected? Note the Contract Date too.
- Start the clock. Notify within eight weeks of becoming aware the event has happened (clause 61.3). A change in law won't come from a Project Manager's instruction, so don't expect the exception to the time bar to save you. Keep the date you first knew.
- Get the source. Pin down the legal instrument, its commencement date and any transitional provisions. A trade body's summary isn't enough.
- Separate the effect. List what has to change on site, what cost and time follow, and what you would have done anyway.
Working out who pays
| Situation | Likely position | Route |
|---|---|---|
| X2 applies, and the law of the Site's country changed after the Contract Date | Client's cost. The event works both ways: if Defined Cost falls, the Prices fall | X2.1 |
| No X2, and the new rule makes the Client's Scope illegal or impossible | The Scope has to be changed by instruction, normally a compensation event | 17.2 (NEC3 18.1), 60.1(1) |
| No X2, and the rule only changes your own design | Generally yours. A design has to meet the applicable law, and a change to your design at your request isn't an event | 21.2, 60.1(1) exception |
| No X2, and the rule only changes your methods or costs | Generally yours, unless another event fits | Check the 60.1 list |
| The change was made before the Contract Date | Not X2. A law made between tender and Contract Date should have been dealt with before signing | Check any Z clause |
| A change in another country pushes up the price of imports | Not X2, which looks only at the Site's country | Option X1 may help if it applies, as a separate matter |
Our guide to Option X2 goes through the tests in detail. The next section concerns the parts of the question it leaves open on a live job.
The contract position against the practical one
The contract says what matters is a change in the law. It doesn't mention regulator guidance, a new company standard or a client policy.
In practice, most arguments are about the edges:
- Revised guidance that a regulator expects you to follow. Is it law? Take advice if a lot depends on it.
- A law passed before the Contract Date but in force afterwards. Which date is the change? The clause turns on when it occurs, and that may need a legal view.
- A Client standard tightened "because of" new law. If the Client asks for more than the law requires, that part is a change to the Scope, so ask for an instruction.
Sample notice wording
What the other side is likely to say
- "You knew it was coming." Foresight is not the X2 test, which looks at dates. It may still matter for an early warning, since an event can be assessed as if a warning had been given when an experienced contractor could have given one (61.5).
- "That's guidance, not law." Produce the instrument.
- "You'd have had to do that anyway." Show your tender or programme basis and price only the difference.
- For the Client: if the new law makes something cheaper, the same clause reduces the Prices. Ask about it, and keep it on the register.
Other forms
X2 is available in the main NEC4 forms, including the PSC and TSC. The TSC looks at the law where the Affected Property is, not the Site. A subcontract uses the Subcontract Date, so a law made between the two dates could be covered at one level but not the other. Check this wherever you have back-to-back subcontracts.
Related guides
- NEC Questions Answered: Real Situations on Site
- Our Permit Has Been Delayed: Who Takes the Risk?
- The PM Refused to Accept Our Design: What Now?
- Does PM Acceptance Remove Our Design Responsibility?
- The Client's Budget Is Being Exceeded: What Controls Exist?
- The Contractor Has Stopped Sending Forecasts
See how this works in practice
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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.