Frequently Asked Questions

We are a project manager and have recently picked up a legacy NEC3 Engineering and Construction Short Contract (ECSC). It seems payment terms are not stipulated, and Y(UK)2 is not relevant here. The contractor is now claiming interest for late payment of multiple invoices over the past year, some of which were paid 40 days after they were due. Interest in the contract is 2% per week for each week of delay. Can the contractor apply for this money a year later, and should this be notified as a compensation event?

The ECSC payment terms are set out in clauses 50.1 and 51.1. If payment is later than stipulated in the contract, the contractor has a contractual right to be paid interest, as set out in clause 51.2. This is not a compensation event, and the employer should have added this interest when making the late payment as it should have known that the payment was later than in the contract. The contractor can therefore rely upon this contractual right at any time and there is no contractual time bar for payment.

In addition, this right to interest also covers the situation where the employer has reduced the contractor’s application and has subsequently changed that to a higher figure in a later payment. In that case, interest on the difference is paid from the time it should have been paid until the time it was paid, again see clause 51.2. Again, there is no contractual time bar on applying for this interest because it is a contractual right.

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