Jurisdiction(s):
United Kingdom

Key definition

Compensation event definition

What does Compensation event mean? In NEC contracts, a compensation event is an event that, under the contract’s risk allocation, entitles the contractor to an adjustment to the Prices and/or the Completion Date (and sometimes Key Dates). It is a defined contractual term in the NEC3 and NEC4 Engineering and Construction Contract and related NEC forms, not a statutory concept. Typical compensation events include instructions changing the Works, Employer risk events, prevention, unforeseeable physical conditions, changes in law, and failures by the Project Manager or Supervisor. The procedure is central to time and money recovery: the contractor must notify (often within eight weeks), submit a...

PFI/PF2 project agreements: Compensation and Relief Events—risk allocation, time and money relief, calculation issues, insurance and PF2/PFI differences

Published by a LexisNexis Construction expert

Practice notes

This Practice Note explores the Compensation event and Relief Event frameworks in the Project Agreement for a PFI or PF2 scheme. It examines the key features of each framework and the differences between them under PFI and PF2 (also occasionally called PFII). In the 2018 Budget, presented on 29 October 2018, the government confirmed that PF2 would no longer be used on new projects (see News Analysis: Budget 2018—what does it mean for infrastructure and housebuilding?). Nevertheless, existing PFI and PF2 projects will continue to operate and, given the typical lifespan of such arrangements, are likely to remain in place for many years to come.

Context

Compensation Events and Relief Events are categories of 'supervening events'; circumstances in which some contractual relief is appropriate and justified. The objective is to manage the allocation of risks between the parties arising from unintended occurrences that negatively affect the Contractor's capacity to perform its obligations under the Project Agreement as specified (or, by extension, the ability of its sub-contractors to perform under their respective sub-contracts). These regimes take on particular significance in PFI and PF2 transactions, where:

the length of the contractual term duration (even with the reduced terms under PF2) increases the...

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Web page updated on 21/05/2026

Popular documents

Using the Judicial College Guidelines to assess general damages in personal injury claims

When evaluating a general damages claim, the practitioner ought initially to refer to the Judicial College Guidelines (JCG)...

Tomlin orders in England and Wales: CPR guidance on drafting, confidentiality, approval, variation, enforcement, limitation, CCA issues, court-specific requirements, sample wording and precedents

This Practice Note This Practice Note reviews mechanisms used in settling litigation. A Tomlin order consists of a consent order paired with a schedule. It operates to stay proceedings on terms that have been agreed. The provisions contained in the schedule may remain confidential. This Practice Note describes the scope of confidentiality attaching to the schedule and sets out how it differs from a standard consent order. Sample wording for a Tomlin order is included, alongside links to precedents, as well as guidance on court approval. It also addresses varying, setting aside and enforcing a Tomlin order, including the considerations the court will take into account when handling applications for each. Further guidance is provided on interpreting and applying the relevant provisions of the CPR; however, some courts and divisions impose very specific requirements for both drafting and approval, and for approaching the schedule and confidentiality issues. Accordingly, you must consider the particular rules and court guide provisions in the forum where your claim is proceeding when drawing up the Tomlin order...

Precedent: Deed of Surrender of Lease with Optional Premium, Settlement and Release, Landlord, Mortgagee and Guarantor Consents, Reimbursement and HM Land Registry Provisions (England and Wales)

Date [ date ] Parties [ name of Landlord ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Landlord) [ name of Tenant ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Tenant) [ [ name of Guarantor ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Guarantor) ] [ [ name of Mortgagee ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Mortgagee) ] Definitions Within this Deed, the terms below shall be interpreted as follows: [ Annual Rent • the annual sum reserved under the Lease; ] [ Insurance Rent • the Tenant’s share of the Landlord’s costs of insuring the Property (as set out in the Lease); ] Lease • the lease of the Property dated [ date ], entered into between (1) [ the Landlord OR [ name ...

Precedent Statutory Declaration: Standard Wording under the Statutory Declarations Act 1835

I, [ name ], of [ address ], solemnly and sincerely state that: [ Matters to be verified, set out in numbered paragraphs ] I make this solemn statement in good conscience, believing it to be true, and pursuant to the provisions of the Statutory Declarations Act 1835. DECLARED at [ details ] this [ day ] day of [ month and year ] Before me ................................................................................ [ signature of the person before whom the declaration is made ] A [ commissioner for oaths OR [ solicitor OR [ insert other qualification ] ] authorised to administer oaths ]...