What is the latest date a compensation event may be notified by the contractor?
Asked by: Norbert Hyatt | Last update: April 25, 2026Score: 4.8/5 (75 votes)
Under NEC contracts (Engineering and Construction Contract), the contractor must generally notify a Compensation Event (CE) within eight weeks of becoming aware of it to retain entitlement to changes in Prices or Completion Date, otherwise, the claim is time-barred. However, this 8-week limit doesn't apply if the CE arises from the Project Manager (PM) or Supervisor's instruction/notification, or if the CE falls under specific categories (like CE 1, 4, 7, 8, 10, 15, 17) which the employer should notify.
What are early warning notices and compensation events?
Early warning notices and compensation events are specific features of the NEC form of contract. They have detailed procedures which must be carefully followed. Those procedures are simple enough once you understand them, but they are time-consuming. The risk of not following them properly is high.
What is a compensation event in a contract?
A compensation event is a term used in NEC contracts to mean an event which can affect the cost to the Client of the work being carried out, the time when the works will be completed, or both. A compensation event is the only way in which these can be changed.
What is the clause 60.1 compensation events?
Clause 60.1 gives a list as to all of the items, that if occur, would give rise to a Contractor being able to claim a compensation event which will consider the time and cost implications of the event. For an event to be a valid compensation event it has to fit one of the reasons listed within this clause.
What is the clause 31.2 in the NEC contract?
New to clause 31.2 in NEC4 is the provision that “A programme issued for acceptance is in the form stated in the Scope.” Previously, in NEC3, the Contractor was left to decide on the form in which the programme information was provided.
NEC3 & 4 - What Is A Compensation Event?
What is the NEC Clause 53?
Clause 53 of NEC4 ECC provides a structured final account procedure, in which the PM must assess and certify the final amount due no later than four weeks after the supervisor issues the defects certificate or 13 weeks following the termination certificate is issued.
What is the NEC Clause 34?
Clause 34 of the NEC4 Engineering and Construction Contract (ECC), entitled 'Instructions to stop or not start work', is split into two parts: an initial instruction and a subsequent instruction. The initial part of the clause gives the project manager the right to instruct the contractor to stop or postpone any work.
Can a compensation event be notified without an early warning?
Does an early warning have to be notified before a compensation event can be notified? No, if something is already an issue then it can be notified as a compensation event. An early warning is something that might or could impact in some way and there is the chance to do something about it.
What is the latest a compensation event may be notified in NEC4?
Typically, the contractor must notify the project manager of a compensation event within eight weeks of becoming aware of it. If they're late with this notification, their entitlement to financial or time compensation may lapse, unless it's an event the project manager should have notified.
What are the 4 types of construction delays?
While the specific terms of a construction contract can vary, there are generally four major types of delay that can impact the timely completion of a project: inexcusable delay, excusable delay, compensable delay, and concurrent delay.
Who issues a compensation event?
Compensation events can be raised by either the contractor, employer, or project manager, but most commonly, it is the contractor's obligation to issue the notification if their costs or programme are affected.
What are the three types of compensation?
The different types of compensation include direct compensation (salary, wages, bonuses, and commissions), indirect compensation (health benefits, retirement plans, paid leave), and non-monetary compensation (recognition, flexible schedules, career development).
What is an example of a compensation clause in a contract?
As compensation for your services to the Company, you will receive $10,000 in cash per year compensation as set forth on Schedule B attached hereto (hereinafter, the "Compensation") for serving on the Board starting from the date of this Agreement, which shall be paid to you quarterly in arrears during your term as ...
What are contract compensation events?
Definition of Compensation Event:
In NEC contracts, a compensation event is defined as an event that is listed in the contract as giving rise to the contractor's entitlement to additional time and/or money. These events may include changes in scope, unforeseen ground conditions, or other specified occurrences.
Who has the duty to notify an Early Warning?
Who should raise an early warning and when? Either the contractor or the employer can raise an early warning, as soon as they become aware of anything that could potentially impact the project. This combined responsibility is key to the NEC contract site, and it's essential for proactive risk management.
What is a warning notice?
Similar to a penal notice. A statement attached to a contact order, explaining that the instructions contained in the order must be obeyed and warning of the possible consequences of failure to comply.
What are early warnings and compensation events?
A contractor may receive compensation for addressing issues raised by way of the early warning system. On the other hand, if a contractor fails to give an early warning of an event which subsequently arises, and that he was aware of, then the contractor is assessed as if he had given an early warning.
What are the 4 conditions of a contract?
A contract is a legally binding promise (written or oral) by one party to fulfil an obligation to another party in return for consideration. A basic binding contract must comprise four key elements: offer, acceptance, consideration and intent to create legal relations.
What is an NCE in construction?
As soon as a contractor is aware of an event, he should issue a Notification of Compensation Event (NCE). If the contractor fails to do this within 8 weeks of becoming aware of the event then they are not entitled to a change in prices, completion date or a key date.
What is the NEC early warning notice clause?
The early warning process is a mechanism for both parties to identify potential problems to the project. The contract emphasises that both Parties are obliged to notify the other as soon as they become aware of a matter that could affect time, cost or quality.
What are the 4 pillars of the early warning system?
Pillar 1: Disaster risk knowledge. Pillar 2: Detection, observation, monitoring, analysis, and forecasting. Pillar 3: Warning dissemination and communication. Pillar 4: Preparedness and response capabilities.
What is the early warning register?
'The Early Warning Register is a register of matters which are • listed in the Contract Data for inclusion and • notified by the Project Manager or the Contractor as early warning matters. It includes a description of the matter and the way in which the effects of the matter are to be avoided or reduced. '
What is the contract act 34?
If the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.
What is the latest NEC contract?
It also introduced two new contracts: the NEC4 Design, Build and Operate Contract (DBO) and the NEC4 Alliance Contract (ALC). An NEC4 contract suite covering facilities management was released in 2021. Several changes to terminology were introduced in NEC4, for example: The term "Employer" was replaced with "Client"
What is the NEC Clause 83?
Importantly, under clause 83, each party indemnifies the other against events which are at its risk.