|Over the years many have scoffed at the use of the words ‘mutual trust and co-operation’ in clause 10.1 of NEC 3 (10.2 in NEC4). Nonetheless publishers of other standard contracts have decided to adopt these or similar words in their own documents.
In Keating on NEC3 David Thomas suggests that, while parties are at liberty to maintain their legitimate commercial interests, ‘they must behave so that their words and deeds are honest, fair and reasonable and not attempts to improperly exploit [the other party]’. I have always felt this to be the correct approach.
Transparency and honesty
Transparency and honesty are absolutely necessary in the operation of NEC contracts that are dependent upon proactive and collaborative management of risk. I was therefore pleased to see this acknowledged by the High Court in Northern Ireland earlier this year.
The dispute was about assessment of compensation events under the NEC3 Professional Services Contract after the work had been carried out. The client argued that, given the consultant now had full records of the actual costs incurred, the effect of the compensation events should not be calculated by reference to forecast costs.
In finding in favour of the client the judge observed, ‘It seems to me that a refusal by the consultant to hand over his actual time sheets and records for work he did during the contract is entirely antipathetic to a spirit of mutual trust and cooperation. Further clauses in the contract such as clause 15 [early warning notices] reinforce that spirit.’
Change of mindset needed
For users more familiar with traditional contracts, a significant adjustment to one’s mindset is likely to be necessary when operating NEC contracts. I have come across many examples where this transition in mindset has not been made because of concerns that cooperation with the other party could prejudice one’s own position or fall foul of the requirements of one’s insurance policies.
The Northern Ireland case sends out a clear message to all NEC users. Acting in a ‘spirit of mutual trust and co-operation’ means more than just paying lip-service to the words. Being open and above board in dealing with the other party is vital in the management of all NEC projects.