X7: Delay Damages

NEC X7 sets a daily rate of damages payable by the Contractor for each day Completion falls after the Completion Date. Without X7 there's no fixed daily rate in the ECC, so choosing whether to include it is one of the most important decisions at the Contract Data stage.

The Option has three clauses in NEC3 and NEC4: X7.1 sets the rate and the period, X7.2 deals with repayment and X7.3 covers partial take over. This page covers the Option itself. For recovering damages in practice, read delay damages in the payment process. It's listed with the other NEC secondary Options.

The three clauses

Clause	Rule in plain English	Practical effect
X7.1	Damages run from the Completion Date until the earlier of Completion and take over	A Client that moves in stops the clock, even if work remains
X7.2	If the Completion Date moves later after damages are paid, the Client repays the excess with interest	Late compensation events can reverse damages
X7.3	If part is taken over before Completion, the damages reduce from that date in proportion to the benefit of the part taken over	The Project Manager makes the assessment

NEC amended the NEC4 clause in October 2020 so that, on the ECC and ECS, damages also stop at a termination certificate. Check which version of the wording you have.

A worked example

A fictional office fit-out with illustrative figures. The rate is £5,000 a day, and the Completion Date is 10 March.

1. Completion hasn't been reached by 10 March. On 25 March the Client takes over one floor. The Project Manager assesses the benefit of that floor at 40% of the benefit of the works not yet taken over.
2. From 11 to 24 March, damages run at £5,000: 14 days x £5,000 = £70,000.
3. From 25 March the rate falls by 40% to £3,000 a day. Completion is on 2 April: 9 days x £3,000 = £27,000.
4. Total: £97,000.
5. In May, a compensation event is implemented and moves the Completion Date by 10 days to 20 March. The days at the £5,000 rate fall to 4, so £50,000 is repaid, with interest from the date paid to the date repaid.

The repayment date also counts as an assessment date, so the money flows through the normal payment process.

Choosing the rate

Delay damages under X7 work as a fixed agreed sum. The rate should be a considered figure tied to the Client's legitimate interest in timely completion. Parties may also set out a rate per section under Option X5.

Think about what you enter:

• A rate of zero or "nil" can mean no damages at all, not unlimited general damages. Take advice if that's what you intend.
• If you leave the Option out, the Client may have to claim general damages by proving actual loss.
• A rate that's far above the likely loss may be challenged, so keep a note of how you reached the figure.

How it links to other clauses

• Option X18: delay damages are one of the matters excluded from the total liability cap, so the cap doesn't limit them. A Z clause is needed if the parties want a cap on them.
• Compensation events: a late or unassessed event means the Completion Date isn't yet settled. Deducting damages against a date in dispute invites an argument. Deal with the events first.
• Pay less notices: under Y(UK)2, a Party has to give notice if it will pay less than the notified sum. Read how the damages are treated on your contract in the pay less notices guide.
• Option C: delay damages are a separate deduction from the share calculation, so keep them apart in your commercial reports.

Common mistakes

• Deducting damages when X7 isn't in the contract, or using a rate other than the one in the Contract Data.
• Counting from the original Completion Date rather than the one current after implemented compensation events.
• Ignoring partial take over. A Client using part of the works can reduce the rate, even if that wasn't the plan.

Related guides

• NEC Secondary Options: X, Y, W and Z Clauses Explained
• X8: Undertakings to the Client or Others
• X9: Transfer of Rights
• X10: Information Modelling
• X5: Sectional Completion
• X6: Bonus for Early Completion

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.