Delay damages
NEC was first published in 1993 as the New Engineering Contract. It is a suite of construction contracts intended to promote partnering and collaboration between the contractor and client. The third edition NEC3 was published in 2005.
The term ‘delay damages’ refers to one of the 15 secondary options available as part of NEC3. ‘X7 – Delay damages (liquidated damages)’ can be selected in part 1 of the contract data, and the level of damages payable can be defined. If option X7 is selected, and the contractor does not achieve the completion date then delay damages will be due from the contractor. This is similar to liquidated damages (or liquidated and ascertained damages, sometimes referred to as LADs) in other forms of contract such as JCT contracts.
NEC guidance recommends that this option is included in most contracts. It is also recommended that the employer maintains a record of how delay damages are calculated in case they are challenged by the contractor. Delay damages are not a penalty, they must be based on a genuine calculation of damages. If they are not genuine, they may be considered a penalty by the courts and so will be unenforceable. Under these circumstances, the client would still be able to pursue a claim for breach of contract.
A contractor wishing to avoid a claim against them for delay damages, may make a delay claim, demonstrating that:
- A compensation event has occurred.
- The event caused a delay to the project’s completion.
Compensation events are similar to relevant events and relevant matters referred to in other forms of contract such as JCT contracts. Very broadly, compensation events tend to be those events that impact on the completion date, but are not the contractor’s fault. This might include events that are caused by the client, or neutral events such as exceptionally adverse weather.
A delay claim for a compensation event can only be made by the contractor if the event actually delays completion. This can require careful analysis where there are multiple possible causes of a delay to ascertain the impact of the compensation event itself.
Generally, there are two approaches that can be adopted for this sort of analysis:
- Prospective: An assessment at the time the event occurs.
- Retrospective: An assessment after the event has occurred.
Whilst there is no express guidance given in NEC3 as to which of the two methods to use, it is thought that the intention of NEC3 to solve problems as they occur, preferably before completion, makes the prospective approach more favourable. Although there remains a risk that this may result in the contractor being under or over-compensated.
However, courts may prefer the retrospective approach, as it can otherwise be difficult to establish a causal connection between the compensation event and the delay, and it also allows for the benefit of hindsight.
There is provision in clause X7.3 for a delay damages reduction in the event that the employer takes control of a part of the works prior to the completion.
[edit] Related articles on Designing Buildings Wiki
- Accepted programme.
- Articles of agreement.
- Compensation event.
- Contract conditions.
- Contractual chain.
- Contractual obligation.
- Cost reimbursable contract.
- Defects.
- Defined cost.
- Disallowed cost.
- Early warning notice.
- Extension of time.
- Key dates.
- Latham Report.
- Liquidated damages.
- NEC3.
- NEC contract change management systems.
- NEC early contractor involvement.
- Penalty.
- Period for reply.
- Procurement route.
- Time Risk Allowance TRA.
- Variations.
- Z clauses.
[edit] External references
- RICS Consultations - Delay damages
- RPC - Delay claims under NEC3
Featured articles and news
Design and construction industry podcasts
Professional development, practice, the pandemic, platforms and podcasts. Have we missed anything?
C20 Society; Buildings at Risk List 2025
10 more buildings published with updates on the past decade of buildings featured.
Boiler Upgrade Scheme and certifications consultation
Summary of government consultation, closing 11 June 2025.
Deputy editor of AT, Tim Fraser, discusses the newly formed society with its current chair, Chris Halligan MCIAT.
Barratt Lo-E passivhaus standard homes planned enmasse
With an initial 728 Lo-E homes across two sites and many more planned for the future.
Government urged to uphold Warm Homes commitment
ECA and industry bodies write to Government concerning its 13.2 billion Warm Homes manifesto commitment.
From project managers to rising stars, sustainability pioneers and more.
Places of Worship in Britain and Ireland, 1929-1990. Book review.
The emancipation of women in art.
Call for independent National Grenfell oversight mechanism
MHCLG share findings of Building Safety Inquiry in letter to Secretary of State and Minister for Building Safety.
The Architectural Technology Awards
AT Awards now open for this the sixth decade of CIAT.
50th Golden anniversary ECA Edmundson awards
Deadline for submissions Friday 30 May 2025.
The benefits of precast, off-site foundation systems
Top ten benefits of this notable innovation.
Encouraging individuals to take action saving water at home, work, and in their communities.
Takes a community to support mental health and wellbeing
The why of becoming a Mental Health Instructor explained.
Mental health awareness week 13-18 May
The theme is communities, they can provide a sense of belonging, safety, support in hard times, and a sense purpose.
Mental health support on the rise but workers still struggling
CIOB Understanding Mental Health in the Built Environment 2025 shows.
Design and construction material libraries
Material, sample, product or detail libraries a key component of any architectural design practice.