Title

This clause is geared towards title passing to the employer when goods are brought to site irrespective of payment.

The Guidance Notes state that the Works Information must identify items which are subject to marking to indicate title to those items is to pass to the employer.

For Options C, D or E payment may not reflect the actual work done, so securing title may have to be against expenditure rather than progress.  

On an employer termination the client can complete the works using any plant and materials to which it has title and any equipment owned by the contractor.

Risk and insurance

This is a very important clause. In a design and build situation what employer is going to want to carry the risk of a fault in its own design? Is an employer going to want to carry the risk of meeting claims from neighbours arising out of the works on site? An employer may therefore want either to alter these employer’s risks or add additional clauses putting the onus on the contractor to deal with these issues.

Employer’s risks should not be confused with the Risk Register. The risks in the Register are those mentioned in the Contract Data. They are in addition to the basic risks in clause 80.1. It is assumed that the Risk Register alters as a project progresses, but the basic risks do not alter. It is always sensible to review the assumption project by project.

It is also important to identify the contractor’s risks. NEC assumes a negative, what is not referred to as an employer’s risk must be a contractor’s risk. This can lead to confusion over who is carrying a risk. The Risk Register may deal with contractor’s risks, but often it does not set them all out.

Risk is supported by indemnities, and in turn indemnities by insurance. Professional indemnity insurance is not a standard requirement, it is not even an option. It needs to be put in as an additional clause.

Contractors do query the ability to insure the contents of the insurance table in joint names. Sometimes insurance can only be effected through a Principal’s clause.

It is not clear how far the insurance is to cover sub-contractors, as the insured are only the employer and contractor.

Termination

The final core clause, reads like a road map with one route leading on to another.

There is an omission, the voluntary placement of a company in administration, highlighted in the case of William Hare Limited v Shepherd Construction. Aside from insolvency related grounds, employers will look closely at clause 91.2 to see if they want to widen the default grounds or whether the four week notice period should be reduced to 14 days.

The first bullet point in clause 91.2 dealing with the contractor substantially failing to comply with its obligations is occasionally altered to make way for something more specific.

It is also worth considering whether the payments on termination reflect what is appropriate for a project. The provisions cover the basics but is more required?

This is the last in my series on the main NEC 3 contract’s core provisions, but do watch out for future articles focussing on other NEC 3 contracts and aspects of NEC.