LEGAL ADVICE
“When entering newNECcontracts prior to the FinanceBill beingpassed, it is wise to agree, where possible, how the reddiesel issue is going tobe dealt with.”
discussed NEC time-bar. If clause X2 has not been included in the contract, the Contractor accepts the risk of any changes in the law and therefore will not be able to recover any costs or time. Interestingly, we are seeing Employers being reluctant to include X2 because of the experience they have had in recent years following significant changes in the legal landscape e.g. Brexit, Covid-19 and now, red diesel. PRACTICAL STEPS TO TAKE The change in the law happens when the Bill comes into force. Close attention to the Contract Date (NEC) and Base Date (JCT) is required as this will affect any claim. When entering new NEC contracts prior to the Finance Bill being passed, it is wise to agree, where possible, how the red diesel issue is going to be dealt with. Will it be a Compensation Event or not? Similarly, under the JCT umbrella, we advise that the parties expressly agree within the contract whether or not the red diesel issue is a Relevant Event (potentially allowing more time) and/
or Relevant Matter (potentially allowing more money). Regarding existing contracts, it is imperative that the parties check what the relevant contract says. Many standard form contracts have been amended or tweaked, so the parties should be sure of their contractual position before taking any steps. Where a contract based on NEC contains clause X2, we envisage it being debated as to when the event should have been notified, both as an Early Warning but more importantly as a Compensation Event. We advise that the “safest” approach is to issue Early Warning and Compensation Event Notices now on the premise of what is expected to happen. This notice can include that the change applies from April 1, 2022, and if this date is changed, it can be updated by issue of an updated Compensation Event notice. Moreover, under JCT, given that an extension for time claim is the only relief available to contractors, it must
provisions will catch up, and so, putting measures in place in advance would be wise to avoid any issues. Employers under JCT will benefit from no contractor entitlement to money in light of the change of the law, however, employers must bear in mind the financial implications this may have for some contractors. While red diesel restriction alone may not be enough to put a Contractor (and therefore a project) into difficulty, when you take into account the impact of Brexit, Covid-19, material costs increases and availability, many contractors may fold under the pressure with the effect that individual projects will suffer.
For further advisory information relating to the introduction of the Finance No 2 Bill 2021, please visit www.millsselig.com
be noted that despite time being granted, eventually the new legal
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