NEC4 AND Y(SG) CLAUSES
Recently, the BCA announced the launch of NEC4 contract for construction and engineering projects in Singapore, together with the NEC4 Y(SG) Clauses. In this short blog, we take a quick look at the Y(SG) Clauses.
With the launch of NEC4 for use in Singapore, there is also the release of “Y (SG) Clauses” (available at https://www.neccontract.com/Singapore-Y-Clauses) for use together with the NEC4 in Singapore.
Option Y(SG)1. The first set of optional clauses relates to the Building and Construction Industry Security of Payment Act 2004 (“SOPA”).
Y1.1 makes clear that the Contractor is entitled to submit “an application for payment (including an application for final payment)”, and that such an application is a payment claim under SOPA. Y1.2 then provides that the Project Manager’s certificate in response to the Contractor’s application for payment is a payment response, and Y1.5 provides that the Project Manager shall certify a payment within 2 weeks of each assessment date.
There are other clauses, but it is relevant to note that Y1.8 deals with an application for final payment, and Y1.11 importantly provides that “The certification of the final payment amount within the time stated in the contract is conclusive evidence of the final payment due under or in connection with the contract” unless the Contractor refers a dispute in relation to the final payment amount to adjudication under SOPA.
On a plain reading of this clause, it is important for a Contractor who is dissatisfied with the final payment amount to commence adjudication. This therefore means that a Contractor ought to start preparing for an adjudication prior to its application for final payment, so that if there is a need to refer the matter to adjudication, the Contractor is in a position to do so.
Option Y(SG)2. The second set pertains to the Contracts (Rights of Third Parties) Act 2001 (“CRTPA”).
Under Y(SG)2, it is provided that the Parties and a “beneficiary” may enforce the terms of the contract “as stated in the Contract Data”, with a “beneficiary” being “identified by class or description and not as a named person or organization.”
In the Y(SG) Guidance Notes, it is stated that Y2.1 to Y2.3 is meant to align with the position under the PSSCOC, Cl. 37.1(2) which provides that “Unless otherwise expressly stated in this Contract, a person who is not a party to this Contract shall have no right under the Contracts (Rights of Third Parties) Act to enforce any of its terms”.
So, it is important when contracting to be clear who the beneficiaries are, as a beneficiary (or the beneficiaries, as the case may be) may enforce the terms of the contract as provided under Y2.1 to Y2.3. This has implications in terms of exposure (to liability).
Option Y(SG)3. The third set pertains to termination and is meant to align the contract with the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”).
This is an important amendment. Up to now, certain termination provisions that we see in construction contracts may still fall foul of IRDA, s. 440, which (essentially) prohibits clauses that “terminate or amend, or claim an accelerated payment or forfeiture of the term under, any agreement (including a security agreement) with the company”, or “terminate or modify any right or obligation under any agreement (including a security agreement) with the company”, by reason only that (1) proceedings are commenced (as defined in IRDA, s. 440(6), which includes an application for compromise or arrangement or judicial management) or (2) that the company is insolvent.
Option Y(SG)4. This last set relates to the Prevention of Corruption Act 1960 and the Penal Code 1871. In short, it is meant to reflect Singapore’s commitment in ensuring that there is no corruption.
Practically, these clauses should not be of a cause for concern, as they do not change the law in Singapore. They effectively do no more than require compliance with the laws of the land.
Conclusion. Option Y(SG) Clauses make modifications to the base NEC4 contract. And some modifications that are made by the Option Y(SG) Clauses are more significant than others.
Nonetheless, what is, perhaps, more important to note is that for many local contractors, NEC4 would be an unfamiliar suite of contract.
It is therefore important to ensure that you are familiar with the mechanisms involved (such as, e.g., the various timelines and requirements) in the NEC4 contract before embarking on an NEC4 contract.
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.