NEC has published new Y clauses for using NEC4 contracts in New Zealand. I prepared the initial draft, then worked with Peter Higgins, Chair of the NEC4 Contract Board, to bring it into NEC's drafting style. The Board provided the final fine-tuning. The published clauses also acknowledge Robert Gerrard and John Walton of Bankside Chambers.
One of the most interesting parts of the work came after the first draft was complete. We went back through it, asking what needed to remain, what the contract already dealt with and what could be removed. Each change had to achieve its purpose while fitting the language and procedures of NEC.
Anyone amending an NEC4 contract should undertake the same review. A provision written to address one concern becomes part of an agreement that the project team must administer. How it works with the rest of that agreement needs as much attention as the wording itself.
NEC4 and New Zealand payment legislation
The New Zealand clauses address the interaction between NEC4 and the Construction Contracts Act 2002. For the Engineering and Construction Contract, Y(NZ)1 connects the Contractor's application for payment and the Project Manager's certificate with the statutory payment claim and payment schedule process. It also makes the exercise of the Contractor's statutory right to suspend performance a compensation event and amends the adjudication provisions.
The published package includes provisions for different NEC4 contracts, with guidance and flowcharts. Users need to select the provisions for their contract form and read the accompanying guidance. Treating an application as a payment claim, or a certificate as a payment schedule, does not remove the need for the document to contain the information required by the Act. The project team still needs arrangements for preparing and responding to payment claims and schedules that meet those requirements.
Starting with the existing contract
When preparing an amendment, it is tempting to explain the whole issue in one place. That can lead to repeating obligations or procedures already contained elsewhere in the contract. Repetition gives the reader another provision to reconcile with the original. If the wording differs, the team has to establish whether the difference was intended to change the obligation.
Before adding wording, the drafter needs to establish how the existing procedure works and identify the gap that requires an amendment. A change may replace a clause, supplement an obligation or alter its operation in particular circumstances. Understanding that relationship helps avoid creating a second procedure alongside the first.
NEC's defined terms and allocation of responsibilities also need to be preserved unless a change to them is intended. Giving an existing role a different name, introducing another form of approval or adding a separate notification route can affect how the project is administered.
An amendment might, for example, require the Contractor to obtain the Client's approval before taking a particular step. Before adding that requirement, the drafter should check whether the contract already gives the Project Manager a relevant decision to make. If both decisions are intended, the wording needs to explain how they fit together. Otherwise, the team may acquire two approval routes without knowing whether one decision is sufficient or both are needed.
The review also needs to follow the consequences of each change. NEC may already attach an effect to an instruction, a refusal to accept or a failure to respond. An amendment affecting one of those actions needs to work with the connected provisions. A sentence can be clear on its own and still leave the amended procedure uncertain.
Deciding what belongs in the clause
Going through a completed draft and taking wording out requires judgement. A shorter provision still has to achieve its purpose. Removing a qualification or a necessary step to save words can change the obligation or leave the team without a workable procedure.
Some wording establishes an obligation or explains what follows if it is not met. Other material repeats an existing requirement or provides background to the change. That background can often sit in guidance, leaving the clause to state the obligation.
For each sentence, the drafter should be able to identify the obligation it establishes or the uncertainty it resolves. Before deleting it, check whether another provision already does that work and whether the procedure will still operate without it. That gives a reason for keeping or removing the words.
Having written a provision, it is easy to concentrate on defending what it says. Examining whether it needs to be there at all requires a different reading of the draft.
Checking the amended procedure
Once the wording is settled, the procedure needs to be followed through as the project team will use it. For a payment amendment, that means working from the application through assessment, certification and payment, including what happens if someone fails to act. A change to dispute resolution needs to be checked against the steps that precede it and the rights available to the Parties.
The review should include the selected options, Contract Data, Scope and other amendments. Wording developed for one arrangement may need further consideration before being used in another. An existing Z clause may also need to be removed or revised when a published Y clause is introduced, rather than leaving both in place to address the same matter.
The person proposing the amendment should be able to explain why it is needed and show how the resulting procedure will work. Going back through a completed draft and removing unnecessary wording belongs in that process.
How Courts Interpret NEC Contracts