An NEC indemnity appears expressly in NEC3 ECC at clause 83, where each Party indemnifies the other against claims and costs due to an event at its risk. The NEC4 ECC doesn't use that word: its clause 82 instead makes each Party pay the costs the other has paid or will pay because of an event for which the first is liable.
The aim is similar, but anyone who still looks for "the indemnity clause" in NEC4 won't find it. This is a key part of how NEC risk and liabilities work in practice.
What the clauses cover
| Point | NEC3 ECC | NEC4 (subcontract text, ECC numbers) |
|---|---|---|
| Clause | 83.1 and 83.2 | 82.1 to 82.3 |
| Wording used | Indemnity | Recovery of costs |
| Trigger | An event at the other Party's risk | An event for which the other Party is liable |
| What's covered | Claims, proceedings, compensation and costs | Costs paid or to be paid as a result of the event |
| Reduction | In proportion to what the other Party's risk events contributed | In proportion to what the recovering Party's liabilities contributed |
Why the change matters
A lawyer would say "indemnity" carries a particular legal meaning, and that the words used can affect things like when a right arises and how it's limited. That is a question for legal advice on the actual contract. The practical points for a site or commercial team are simpler:
- Both versions are about passing the cost of an event to the Party it belongs to.
- Both rely on the lists: if you don't know whose liability the event is, you can't apply the clause. See Client's liabilities and Contractor's liabilities.
- Both reduce the recovery if the other side's actions contributed.
How the reduction works
This is a contractual form of shared blame. A fictional example, with illustrative figures: a scaffold on a housing scheme collapses during a storm and damages a neighbour's conservatory. The neighbour's claim is settled at £40,000, paid by the Client. Investigation shows two causes: the Contractor's subcontractor had left out some ties, and a Client-appointed specialist had removed others without telling anyone. The Parties agree that the Contractor's liability contributed 75%.
| Step | Amount |
|---|---|
| Total cost paid by the Client | £40,000 |
| Reduction for the Client's contribution (25%) | £10,000 |
| Recovered from the Contractor | £30,000 |
The contract doesn't give a formula. It asks you to weigh what each Party was responsible for under the contract, so the split is a judgement. Clear records of what happened usually decide it.
Not the same as a compensation event
A compensation event changes the Prices and the Completion Date for the effect on the work. Recovery under clause 82 reimburses a loss. Where an event on the Client's list has caused both a delay and a payment to a third party, you may need to consider both, and check that the same cost isn't claimed twice. See the compensation event at 60.1(14).
What's often added
Many Clients, or their advisers, add further indemnities by Z clause. Typical ones cover data protection, intellectual property, tax or specific third-party rights. Check them carefully:
- Is it wider than clause 82? Does it cover the Client's own loss as well as third-party claims?
- Does the proportional reduction still apply? A new indemnity may not include one.
- Is it inside or outside any cap? Read it with Option X18.
- Is it insurable? Ask your broker. Some contractual liabilities are excluded from a standard policy.
- Does it pass down? A Contractor giving an indemnity needs to consider what it gets from its subcontractors.
Our Z clause mistakes guide covers the broader risks of such drafting.
What to do when an incident happens
- Notify your insurer, and follow the policy's conditions.
- Don't admit liability to a third party without checking first.
- Tell the other Party quickly, and keep the facts separate from opinions.
- Record what you pay, and why.
- Decide who's handling the claim, so that it's not handled twice.
This page is general guidance and doesn't replace legal advice, especially where a large claim or an amended clause is involved.
Related guides
- NEC Risk, Liabilities and Insurance
- Risk Allocation by Main Option
- Risk Allowances in Quotations
- Limiting Liability Under NEC
- Contractor's Liabilities
- Insurance Under NEC
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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.