NEC delay damages only apply if Option X7 is in the contract. The Contractor then pays the Contract Data daily rate for every day between the Completion Date and Completion, or the day the Client takes over the works if that's sooner.
The NEC4 version, amended in 2020, also stops at a termination certificate. For the Option itself, see Option X7. This guide is about how delay damages work in the payment cycle, and it sits within the NEC payment and Defined Cost guide.
The three clauses
| Clause | What it does | Numbers you need |
|---|---|---|
| X7.1 | The daily rate runs from the Completion Date until Completion or take over | Rate per day in the Contract Data |
| X7.2 | If the Completion Date later moves, the overpayment is repaid with interest. The repayment date becomes an assessment date | Interest rate in the Contract Data |
| X7.3 | If the Client takes over a part early, the rate reduces by the Project Manager's assessment of the benefit | A proportion, worked out by the Project Manager |
The numbers are the same in NEC3 and NEC4. With sectional completion under Option X5, each section can have its own rate, so read the Contract Data for each.
How they reach the money
Delay damages are an amount payable by the Contractor, so they sit in the third line of the amount due under clause 50. They reduce the certified amount at the first assessment after the Completion Date has passed without Completion. No separate invoice is needed. And, because the certificate already reflects the deduction, the usual pay less notice isn't necessary for an amount that's correctly in the certificate.
Worked example
A fictional contract with illustrative figures: delay damages of £2,000 a day and the Completion Date of 31 March.
| Event | Effect | Running total paid |
|---|---|---|
| Completion on 30 April, which is 30 days late | 30 × £2,000 charged in assessments | £60,000 |
| A compensation event is later implemented, moving the Completion Date to 10 April | Delay is now 20 days, so £40,000 is correct | £40,000 after repayment |
| Repayment | £20,000 goes back with interest from the date it was paid, and that date of repayment is an assessment date | £20,000 returned |
The X7.2 repayment isn't a favour. It's a contract right. This is one reason a Project Manager should assess compensation events promptly, because a late assessment can create an interest bill.
Part take over
Suppose the Client takes over a car park on 10 April, while the main building isn't finished until 30 April. The Project Manager assesses the benefit of the car park as a share of the benefit of taking over everything not yet taken over. Say it's 20%. The rate falls by that share from 10 April.
- 31 March to 10 April: 10 days at £2,000 = £20,000.
- 10 April to 30 April: 20 days at £1,600 = £32,000.
- Total: £52,000.
The test is the benefit, not value or area, so a small but vital part can reduce the rate significantly. The figures here are illustrative. Note that the Project Manager makes this assessment, so a record of the reasoning helps.
Common questions
- What if the rate is blank? With X7 selected and a rate missing, or with X7 not selected at all, the position is less clear. Whether general damages are available is a legal question on the wording of the contract, so take advice.
- Do damages stop at the Accepted Programme's planned Completion? No. The test uses the Completion Date, not a planned date. Terminal float doesn't change it.
- Does a failed Key Date count? A Key Date has its own rule, at 25.3. Delay damages are about Completion.
- What about Completion that's disputed? Damages run until Completion is reached, not until the certificate is issued. A late certificate shouldn't extend them, so check the date Completion actually occurred.
What people get wrong
- Deducting without X7. No Option in the Contract Data means there's no contract rate to deduct.
- Using the Completion Date from the tender. Always use the current date after implemented events.
- Stopping at the wrong event. Take over before Completion stops them as well.
- Not repaying interest. See common payment mistakes.
Related guides
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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.