REUTERS | Pillar Lee

NEC contracts are considered by the courts

The Chinese year of the snake has just started. Hello to the year of the snake, goodbye to the year of the dragon. This got us thinking: perhaps it’s time to slay a construction law dragon.

There’s a common saying among lawyers and commentators that NEC contracts are rarely before the courts. We’re not sure that’s really true any more. Here’s a summary of our case:

The TCC has dealt with or referred to the NEC in 2012 and 2013

Here are four cases that have dealt with NEC contracts between February 2012 and February 2013 (others have referred to NEC contracts in passing):

The courts have referred to good faith clauses in 2012 and 2013

One of the criticisms levelled in the past at the NEC suite was that its “act in a spirit of mutual trust and co-operation” obligation would be difficult to enforce (NEC3 clause 10.1). While it might be too much to label recent cases as a new trend, it seems to us (and our contributors) that the courts are increasingly happy to deal with a “good faith” clause in practice. See, for example:

Adjudicators are used to dealing with the NEC

While we admit that our evidence is mostly anecdotal, we know that adjudicators deal with NEC contracts. Adjudicators tell us they are dealing with NEC disputes and, if a dispute arises, adjudication is what the NEC suite demands.

The courts refer to the detail of the current JCT contracts less often than you might think

Although JCT contracts were in the background of many disputes in the public domain, there are only a few recent decisions (since February 2012) that arguably add to the TCC’s interpretation of JCT contracts. For example:

While JCT contracts are in very widespread use in practice, and while not all JCT clauses change each time their contracts evolve into a new edition, none of these cases referred to the JCT’s latest editions.

Perhaps if you want to say that the NEC contracts are rarely before the courts, it’s necessary to concede that the JCT contracts are rarely before the courts too.

However, the advantage the JCT has, where its clauses have not had to change over time, is that there are older authorities, pre-dating even the first edition of the NEC suite.

Why might this matter?

It’s a double-edged sword (or should that be a snake in the grass?):

  • For those who would like to see the NEC used more, perhaps they must accept that it can and does lead to disputes.
  • For those who argue that the NEC may be untested, there is increasing judicial authority to support the view that the TCC is capable of robustly interpreting and testing the NEC as the need arises, just as they must test new JCT clauses from time-to-time.

We’d argue that the NEC comes before the courts often enough for parties to reassess the “untested” label.

3 thoughts on “NEC contracts are considered by the courts

  1. This is an interesting and provocative article. It may not persuade all, however, that there is sufficient judicial commentary on the legal aspects of administering NEC in practice to consider it on a par with the JCT form in that regard. True, much JCT case law is old, but it does not follow that the principles underlying older case law do not underpin court interpretation of younger JCT forms. Quite the contrary. It is precisely the long years of judges scrutinising the JCT forms that means that even where there is no specific guidance yet on particular terms (new or old), we nonetheless have an overall framework for understanding them and gauging how the courts will approach them. And even though the JCT contracts are fiddled and tinkered with, the resultant changes rarely make a big difference to the overall approach taken by the JCT forms. By contrast, the corpus of case law on NEC, while it inevitably continues to build, is nonetheless in relative infancy. There’s no doubt that NEC is a good contract that works for many who use it, and the fact that it doesn’t become the subject of court decisions all that often (even in bleak economic times) may be another feather in its cap. But let’s not get carried away about how much real practical guidance there has been on this form from the courts. On a grey day like today, swallows and summers come to mind …

  2. Thanks Nick. I agree we were trying to test the boundaries of what “tried and tested” might mean.
    It would be churlish to hope for a flock of disputes (or should that be swallows) on the NEC. However, I think it is fair to say that a body of case law is developing. Whether that body is sufficiently well-developed for any one lawyer, user or project’s needs remains a more taxing question.

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