Key Takeaways
- A compensation event UK is an event or change affecting costs or project deadlines, which may entitle you to extra payment or time under NEC contracts.
- You must notify a compensation event NEC within strict contract timeframes, often just 8 weeks from when you became aware of it, or risk losing your right to claim.
- Failure to notify on time can mean losing the chance to recover additional costs or time extensions—potentially causing substantial financial loss.
- Accurately following the NEC3 or NEC4 compensation event process is critical to safeguarding your contractual rights and managing risk in construction projects.
- If the employer or project manager disputes your claim, gather evidence and seek legal support right away to strengthen your position.
- Understanding your contract risk compensation clause is key, as risk allocation impacts who is responsible for a compensation event’s costs.
- Our solicitors help you identify, notify, and claim for compensation events—ensuring you comply with all procedural and evidential requirements.
- We are rated Excellent on Trustpilot with over 130 five-star reviews and a 4.9/5 satisfaction rating.
How Do You Notify and Claim a Compensation Event Under NEC Contracts in the UK?
Missing the deadline to notify a compensation event is the main reason contractors lose their claim to extra time or money under NEC contracts in England and Wales. Many employers and contractors do not realise they may have only eight weeks to submit a notification—or risk forfeiting their entitlement.
Knowing what counts as a compensation event UK, why prompt notification is essential, and how contract risk allocation works are crucial steps. You must be able to notify a compensation event NEC quickly, assess the strength of your claim, and avoid the pitfalls of missed deadlines or vague contract wording.
Understanding this process protects your financial and legal interests. If you need advice on NEC3 or NEC4 requirements or want help preparing your notification, contact our construction lawyers for expert support.
What Is a Compensation Event Under NEC Contracts in the UK?
A compensation event under an NEC contract is a defined event that alters the contractor’s obligations or risks—entitling them to claim extra time, payment, or both. Common examples include late design changes from the client, unexpected ground conditions, delays in site access, or other incidents that are outside the contractor’s control.
Unlike standard forms such as JCT or FIDIC, which separate variations and extensions of time, NEC contracts use the compensation event mechanism to cover both types of adjustment. Every NEC contract sets out which events qualify, and how they must be handled.
Contract terms differ. Always review the contract’s schedule and the specific definition of compensation events to determine your rights and obligations before taking action. The precise allocation of responsibility may dictate whether claiming is possible.
How Do You Identify and Notify a Compensation Event NEC?
Identifying and notifying compensation events requires ongoing vigilance and a proactive mindset.
- Monitor the contract and construction programme to spot any deviations or changes to planned work.
- Focus on events that are the employer’s responsibility or which a competent contractor could not reasonably have foreseen.
- Compensation events can be raised by either the contractor, employer, or project manager, but most commonly, it is the contractor’s obligation to issue the notification if their costs or programme are affected.
A correct notification must include:
- An explicit statement that a compensation event is being notified.
- Details of the occurrence—dates, facts, and immediate effect on time or costs.
- Reference to the relevant contract clause or schedule entry.
You should send the notice formally to the project manager, using the communication method set out in the contract (typically by email, digital portal, or hard copy). Notices served incorrectly can be ruled invalid, with serious consequences.
If you are unsure how to draft a valid notification or need a rapid review, our expert lawyers offer fixed-fee solutions to protect your rights promptly.
What Are Common Examples of Compensation Events in Construction Projects?
Compensation events cover a broad range of real-world scenarios, many arising from typical construction practices or unexpected developments.
- Change instructions from the employer or project manager after contract signing.
- Delays because the employer failed to provide timely site access or critical information.
- Alterations to specifications or materials during the works.
- Discovery of physical site conditions (e.g., hidden pipes, asbestos, contamination) unforeseeable for a competent contractor.
- Events such as archaeological finds, severe weather beyond the stated threshold, or statutory undertaker delays—unless specifically contractor risk.
Immediate documentation and notification are fundamental. Good records and timely action give your claim the best chance of success.
You may also find our article on A Guide to Loss and Expense Claims in Construction Disputes useful if you are considering a parallel or alternative claim.
What Is the NEC3/NEC4 Compensation Event Process?
The NEC3 and NEC4 compensation event process is structured and requires strict adherence to each stage.
- A qualifying event occurs.
- The observing party issues a written compensation event notice as soon as practicable, and always within the period stated in the contract (often 8 weeks).
- The project manager reviews the notice and decides whether it qualifies as a compensation event.
- If accepted, the contractor submits a detailed quotation, setting out the impact on time and cost, with supporting evidence.
- The project manager evaluates the quotation, accepting, rejecting with reasons, or requesting amendments.
- If agreed, contract prices and key dates are updated to reflect the event’s effect.
If you do not serve the notice within the contract deadline, your entitlement lapses—even if your costs are genuine.
Step-by-Step: How to Notify and Claim a Compensation Event Under NEC Contracts
To properly use NEC’s compensation event process for notification and claim:
- Check the contract’s compensation event definitions to see if the incident qualifies.
- Issue a formal notice, clearly labelled as a compensation event notification, including relevant contractual references.
- Detail precisely what happened, when, and how it is expected to impact project time or budget.
- Send the notice through the correct contractual channel to the project manager immediately.
- If accepted, assemble a comprehensive quotation with all contemporaneous evidence (e.g., resource logs, invoices, schedules, site diaries, photos).
- Respond promptly in writing to any clarifications requested by the project manager.
- Keep a dedicated log of all related communications and submissions.
Quick and precise notifications, as well as carefully prepared supporting evidence, strengthen your claim’s prospects and reduce the risk of unnecessary disputes.
What Are the Time Limits for Notifying a Compensation Event in the UK?
The NEC3 and NEC4 contracts set a standard deadline of 8 weeks to notify a compensation event once the contractor becomes (or should have become) aware of it. Specific events, such as employer instructions or risk events, may require even swifter notification—sometimes “immediately,” as detailed in the contract.
Missing these deadlines almost always means the right to extra money or time is lost, regardless of fault or the value involved.
If you think you might be out of time or want to understand your position, book a rapid contract review with our construction lawyers to assess your options before further rights are lost.
What Happens If You Miss the Deadline or Fail to Notify Correctly?
Missing deadlines or failing to comply with procedural requirements is the greatest risk to contractors under NEC contracts. The compensation event framework is clear: entitlement is tied strictly to proper and timely notice. If you fail to comply in full, your claim will usually be dismissed, leaving you responsible for all resulting cost or time overruns.
If you have missed a deadline, prompt legal advice is crucial. Sometimes, limited exceptions such as waiver or estoppel may be arguable depending on the facts—but these are rare.
How Does a Compensation Event Affect Payment, Deadlines, and Extensions of Time?
An accepted compensation event allows contractually authorised changes:
- The “Prices” (contract sum or target costs) are adjusted to account for additional expenses proven by the contractor.
- The contract “Completion Date” or milestones can be extended, relieving you from liquidated damages or delay penalties.
- Recovery is based on mechanisms such as the NEC’s Schedule of Cost Components, which requires detailed cost submissions.
To recover the full amount you are owed, keep comprehensive records—labour, materials, plant costs, and up-to-date communication trails all matter. Payment is made per the contract, following project manager approval.
If you need guidance with the assessment of compensation or preparing evidence to support a claim, our construction dispute team can provide tailored, fixed-fee services.
Who Bears the Risk? Understanding Your Contract Risk Compensation Clause
Compensation events hinge on how risks are allocated in the contract.
- Under NEC contracts, risks not explicitly assigned to the contractor remain the employer’s responsibility. This means unexpected costs from such events can often be claimed, provided notification rules are followed.
- In contrast, JCT and FIDIC contracts list traditional “employer’s risks” and “contractor’s risks,” which are sometimes less clearly defined and open to interpretation.
Starting a project with a detailed risk review can reveal opportunities to claim later, and prevent costly mistakes about who should bear certain losses.
What Laws and Deadlines Apply to Compensation Events in the UK?
Compensation events are creatures of contract, not statute law, in England and Wales. Key legal frameworks include:
- Limitation Act 1980: Allows parties six years (for simple contracts) or twelve years (if executed as a deed) to bring claims in court.
- Housing Grants, Construction and Regeneration Act 1996 (HGCRA): Provides cashflow protections and access to adjudication, but does not itself define what is or isn’t a compensation event.
- Statutes such as the Misrepresentation Act 1967 and Unfair Contract Terms Act 1977 become relevant only if there are disputes over contract validity, fraudulent misstatement, or unfair terms.
Careful diary management avoids the risk of missing both contractual and statutory limitations. If in doubt, seek advice early—losing rights due to limitation can mean the loss of entire claims.
What Do the Courts Say About Compensation Events and NEC Processes?
Courts and adjudicators in England and Wales expect strict compliance with notice and procedural requirements. Notable cases include:
| Case | Facts | Outcome | Why It Matters |
|---|---|---|---|
| Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2014] EWHC 1028 (TCC) | Contractor claimed for unforeseen conditions. | Claim failed; court found risk was foreseeable. | Shows how strictly courts interpret “unforeseen” and the need for evidence. |
| Northern Ireland Housing Executive v Healthy Buildings (Ireland) Ltd [2017] NIQB 43 | Delay in notification under NEC. | Claim rejected due to late notice. | Confirms that late notification will typically invalidate a valid compensation claim. |
| Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC) | Dispute over extension of time and loss/expense under JCT. | Contractor succeeded; timely notice and backup records were pivotal. | Highlights the power of early notification and thorough documentation. |
Proving both what happened and that strict contractual steps have been followed is key to success in any NEC compensation event dispute.
How to Respond to a Disputed or Rejected Compensation Event Claim
If your compensation event notice or quotation is rejected:
- Obtain the project manager’s written reasons—this may clarify errors or gaps in your evidence.
- Collate all contemporaneous records—site diaries, email trails, signed instructions, schedule analysis, and all agreement correspondence.
- Try resolving the dispute informally before escalating to adjudication, arbitration, or court.
- Pursue the dispute resolution options in your contract. NEC contracts typically route unresolved cases to fast-track adjudication, with the court or arbitration as back-up.
If your claim is disputed or you are unsure how to proceed, our litigation team can step in at any stage—offering a fixed-fee assessment or, in qualifying cases, a no-win-no-fee arrangement.
Our Winning Approach to Compensation Event Claims and Disputes
Our approach to compensation event disputes blends legal precision, industry knowledge, and agile strategy, ensuring clients meet strict NEC requirements:
- Fixed-fee contract reviews for fast, accurate advice on your compensation event rights.
- Secure document upload via our Go Transfer portal for organised, time-stamped evidence sharing.
- Direct access to our specialist construction solicitors via WhatsApp for urgent communications.
- Step-by-step support for drafting notifications, compiling evidence, and assembling airtight claims.
- Representation across negotiation, adjudication, mediation, and litigation—with a real record of success in the courts.
- Risk allocation advice to maximise contractor recovery and identify key employer risks pre-emptively.
- Flexible funding, including no-win-no-fee support for qualifying cases.
If you need to notify, challenge, or substantiate a compensation event claim, our team delivers practical, strategic solutions.
Frequently Asked Questions
Can I claim for lost profit as part of a compensation event under NEC contracts?
You can claim for direct financial loss and reasonable extra costs, but recovery of lost profit on future work is unlikely unless expressly stated in your contract.
Is a late compensation event notification ever accepted by the project manager?
Rarely—most project managers will reject late notifications unless they expressly agree to accept them in writing. Always notify as soon as possible.
How does a compensation event differ from a variation?
A variation is a formal change to the work. A compensation event includes both variations and a wider range of unforeseen events that impact cost or time. NEC contracts use “compensation event” instead of “variation.”
Are compensation events treated differently under NEC3 and NEC4?
The process and principles are very similar. NEC4 has more detailed procedures for early warnings and often includes digital notification tools—read your contract’s edition to confirm.
What documentation do I need to support my compensation event claim?
Maintain comprehensive site diaries, correspondence, signed instructions, invoices, and records of the delay or additional cost.
Can the other party dispute my compensation event on grounds of poor project planning?
Yes—the employer or project manager may argue the delay was caused by inadequate planning. Detailed evidence and proactive legal support are vital.
Is specialist legal advice necessary for compensation event disputes?
While not obligatory, having our expert solicitors on your side reduces costly errors and increases your prospects of success or early settlement.
Which party typically has the burden of proof in a compensation event claim?
The claimant (usually the contractor) must prove both the occurrence and the value of the compensation event.
Can multiple compensation events be notified at once?
Yes, but you must clearly describe and substantiate each event—confusion can weaken your overall claim.
What happens if the compensation event process leads to an unresolved dispute?
Most NEC contracts require unresolved disputes to go first to adjudication, then to court or arbitration if unresolved. Prompt, well-supported escalation is crucial.
Get Expert Help With NEC Compensation Events Today
Dealing with compensation events under NEC contracts correctly can be the difference between recovering substantial claims or absorbing expensive losses. Delayed action, incomplete evidence, or procedural errors result in lost entitlements and financial setbacks. Acting quickly and in full compliance gives you the best chance of protecting your business.
Our proven construction and litigation solicitors ensure your notifications, claims, and negotiations are robust, compliant, and strategically positioned for success. Call our expert team on 0207 459 4037 or arrange a Free Consultation using our online form.
