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...

NEC3/NEC4 ECC compensation events: integrated time and money claims—notification, quotations, early warning, time-bar condition precedent, prospective assessment, programme impacts and key authorities

Published by a LexisNexis Construction expert

Practice notes

This Practice Note explores the treatment of Compensation events within the NEC3 and NEC4 contracts. When compensation events occur, the Contractor may qualify for extra time and/or payment. It focuses specifically on the NEC3/NEC4 Engineering and Construction Contract (ECC), although similar provisions appear across the suite of contracts.

Key features

The compensation event framework in the NEC contracts is set out in section 6 of the core clauses. Key features include:

there is a single, integrated procedure addressing the Contractor’s claims for additional time and money, alongside a single schedule of qualifying events. This stands in contrast to the JCT contracts, where grounds entitling the Contractor to extra time (‘Relevant Events’) and to money (‘Relevant Matters’) are treated separately.

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Web page updated on 21/05/2026

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