JCT vs NEC liquidated damages: the defence X7 removes
By Roman Bazelchuk | NEC Accredited Project Manager | APMG Project Planning and Control
Founder, NEC Planning Solutions Ltd
Under JCT the employer must certify non-completion, notify an intention to deduct and serve a pay less notice before taking a penny. Under NEC the project manager simply assesses, and the money comes out of the next payment. The procedural defence a JCT contractor relies on does not exist.
Delay damages are the part of the transition contractors think they already understand. The rate is in the contract data, it runs per week or per day, and it starts when you are late. All true, and all beside the point. What changes on the move to NEC is not the arithmetic. It is who applies it, what has to happen first, and whether the contractor has anything to argue about when it lands.
This is the fourth article in a series on the move from JCT to NEC. The four things that change at once are set out in the guide to what actually changes when a contractor moves from JCT to NEC. The entitlement machinery is in Relevant Events and compensation events, and the deadlines in JCT vs NEC notices. This one takes the consequence at the end of all of them: what happens to the money when Completion arrives late.
There is a conclusion in here that most contractors find backwards when they first meet it. Delay damages under NEC are optional, and a contractor is usually better off with them than without.
How JCT liquidated damages actually work
The rate is the least interesting part of the JCT regime. What matters commercially is the sequence the employer has to follow before the money moves.
The employer must first certify or notify that the contractor has failed to complete by the Completion Date. It must then notify its intention to deduct liquidated damages. It must then serve a valid pay less notice against the payment it intends to reduce. Three separate procedural acts, each with its own timing, and each capable of going wrong.
That sequence is the contractor's real protection. A deduction made without the right notices, or with a notice served late, can be reversed in adjudication whatever the merits of the delay itself. It is the reason experienced JCT commercial teams treat a threatened deduction as a procedural question first and a delay question second, and why the pay less notice sits at the centre of so many disputes.
Two further limits sit behind it. A rate set so high that it is out of all proportion to the employer's legitimate interest in timely completion is a penalty and unenforceable, following Cavendish Square v Makdessi. And where the employer causes delay with no mechanism to extend time, time can be set at large, the fixed Completion Date falls away, and the right to liquidated damages goes with it.
NEC X7 delay damages: what the contractor cannot argue about
NEC arrives at the same commercial outcome through a route with almost none of that in it.
Delay damages sit in secondary option X7. Where X7 applies, damages run at the rate in the Contract Data from the Completion Date until the earlier of Completion or the date the Client takes over the works. They are deducted from the price for work done to date when the amount due is assessed.
The part worth reading twice is who does that. NEC's own guidance is explicit that it is the project manager, not the Client, who decides when delay damages are payable and in what amount. There is no employer certificate of non-completion, no notice of intention to deduct, and no separate pay less notice for the deduction itself. The damages are simply part of the assessment, and they appear in the payment certificate like anything else.
For a contractor arriving from JCT this is the single largest change, and it is a change in what can be defended rather than in what is owed. The three procedural gates disappear. What is left is the substantive question of whether the Completion Date should have moved, which is answered through compensation events and nowhere else. The notice regime that decides that question therefore stops being administrative housekeeping and becomes the whole defence.
JCT vs NEC liquidated damages: three differences
X7 is optional, and a contractor usually wants it
The NEC core clauses say nothing about delay damages. If the Client wants them, secondary option X7 has to be selected and a rate stated in the Contract Data. If it is not selected, the Client is not left without a remedy. It falls back on general damages at common law, which means proving actual loss, without a ceiling and without a daily figure anyone can forecast.
So a contractor negotiating X7 out of the contract has not removed its exposure to late completion. It has converted a known number into an unknown one, and given up the certainty that a liquidated rate provides. Unless secondary option X18 limits liability, the replacement is uncapped. That is a worse commercial position dressed up as a win, and it is negotiated for on a regular basis.
The JCT equivalent behaves differently, which is why the instinct does not transfer. Where a JCT contract states a rate of nil rather than omitting the provision, the courts have treated that as the parties agreeing that late completion carries no damages at all, following Temloc v Errill Properties. The employer then recovers nothing rather than falling back on general damages. Omitting a clause and writing nil into it are not the same act, and they do not produce the same result.
The programme moves the date the damages run from
Site teams get this wrong more often than anything else in X7, and it runs against the instinct a programme-literate team has built everywhere else. Delay damages under X7 do not begin because the accepted programme shows planned Completion drifting past the Completion Date. NEC guidance is clear that what the programme shows is irrelevant here. The contractor is in default only on failing to achieve Completion by the Completion Date itself. A programme forecasting six weeks of overrun triggers nothing on its own. The delay analysis that proves the entitlement is what moves the date, and the date is what the damages run from.
The practical consequence is a sequencing one. The programme is not a shield held up when the deduction arrives. It is the instrument that has to have moved the Completion Date before the deduction can arrive at all. A contractor that assembles its case after the first deduction has already lost the argument it thought it was preparing for.
Overpaid damages come back, with interest
Clause X7.2 does something JCT does not do in the same automatic way. If a later assessment moves the Completion Date to a later date after delay damages have been paid, the Client repays the overpayment together with interest, calculated from the date of payment to the date of repayment.
That turns delay damages into a provisional figure rather than a final one, and it changes the negotiating posture. A contractor under NEC does not have to win the argument before the money is taken in order to get it back. It has to win the argument eventually, and the contract prices the delay in the meantime. Under JCT, recovering a deduction is a claim the contractor has to bring and fund.
Take over cuts the other way and is worth watching. Under X7.3, where the Client takes over part of the works before Completion, the project manager assesses the benefit of that part as a proportion of the benefit of taking over the whole, and reduces the damages accordingly. Partial occupation on a JCT job produces a similar reduction, but on NEC it is the project manager's assessment rather than a negotiated position.
The two regimes are easier to compare side by side than to describe.
Where the forms have moved, and where NEC has not
Termination used to be the unresolved corner of this subject on both forms. In Triple Point Technology Inc v PTT Public Company Ltd the Supreme Court held that liquidated damages accrue up to the date of termination as an accrued right, even for work the contractor never completed. General damages cover the period after it. The Court of Appeal had held otherwise, and the decision restored the position most of the industry had assumed all along.
JCT has since written that into the contract. Design and Build 2024 carries a new provision at clause 2.29.5 dealing expressly with liquidated damages on termination, so the position no longer depends on how a particular clause is construed.
NEC has not made the equivalent move in the Engineering and Construction Contract. X7.1 runs delay damages to Completion or take over and does not address termination in the same express terms. That is not a defect so much as a gap, and it is one worth raising with whoever is drafting the contract rather than discovering during a termination. A Z clause dealing with it is cheaper than an argument about it.
A second lesson in Triple Point gets less attention and matters more to a contractor. The Supreme Court also held that the contract's overall cap on liability extended to the liquidated damages. Because the cap had already been consumed by general damages, the employer recovered none at all. Where a limitation of liability is in play, the interaction between the cap and the delay damages is worth modelling before signing rather than after.
Summary
Liquidated damages and delay damages do the same commercial job and hand the contractor very different tools. JCT surrounds the deduction with procedure, and the procedure is where contractors defend themselves. NEC removes the procedure, puts the assessment in the project manager's hands, and leaves the contractor with one line of defence: having moved the Completion Date before the date arrived.
The reframing worth taking from it is that X7 is not the enemy. An unliquidated, uncapped exposure to proven loss is worse than a known daily rate, and the contract already contains the mechanism for making the rate stop applying. What that discipline looks like across a live project is set out in the carbon capture plant case study. The rate is fixed on the day the contract is signed. The date it runs from is not, and that is the part worth working on.
Frequently asked questions
What is secondary option X7 in NEC4?
X7 is the secondary option that provides for delay damages. Where it is selected, the contractor pays damages at the rate in the Contract Data from the Completion Date until the earlier of Completion or the date the Client takes over the works. The NEC core clauses contain no delay damages provision, so without X7 there are none.
Does the employer serve a notice before deducting NEC delay damages?
No, and this surprises contractors moving from JCT. NEC guidance is explicit that the project manager, not the Client, decides when delay damages are payable and in what amount, and they are deducted when the amount due is assessed. There is no non-completion certificate and no separate notice of intention to deduct.
Can delay damages be recovered if the Completion Date later moves?
Yes. Clause X7.2 requires the Client to repay any overpayment together with interest, calculated from the date of payment to the date of repayment, where a later assessment moves the Completion Date to a later date. Delay damages under NEC are therefore provisional until the Completion Date is settled.
Do delay damages start when the programme shows late completion?
No. The accepted programme showing planned Completion beyond the Completion Date does not trigger delay damages. The contractor is in default only on failing to achieve Completion by the Completion Date itself. The programme's role is to move that date through compensation events before it arrives.
Is a contractor better off without delay damages in the contract?
Usually not. Removing X7 does not remove liability for late completion; it replaces a known daily rate with general damages at common law, which are unliquidated, require proof of loss and are uncapped unless secondary option X18 limits liability. A stated rate provides certainty a contractor can price.
About the author
Roman Bazelchuk is the Founder of NEC Planning Solutions Ltd, a UK project planning and controls consultancy supporting contractors with NEC programme compliance, compensation event assessments and live project controls. He is an NEC Accredited Project Manager and holds the APMG Project Planning and Control qualification, with a BEng in Mechanical Engineering and postgraduate training in Planning and Control.
NEC Planning Solutions provides contract-aware planning support through a QA-governed delivery model, helping project teams keep programmes accepted, current and commercially useful from tender through to live delivery.
Delay damages already running on your project?
Once the Completion Date has passed, the only thing that stops the meter is moving it, and that is a compensation event question rather than a negotiation. Specialist compensation event support builds the assessment that moves the date, and does it before the deduction rather than after.
