In addition to the main and secondary X options, NEC4 contracts provide optional clauses, identified as Y(UK), which are available for use to address particular regulatory and practical considerations relevant to UK-based construction projects. If intended to be incorporated into the conditions of contract, the relevant Y(UK) clause must be referenced in the general section of contract data part one together with the corresponding data required by the clause.
Y(UK)1: Project Bank Account
The objective of a Project Bank Account (PBA) is to ensure subcontractors and suppliers receive payment promptly reducing payment delays often faced by lower-tier suppliers. The PBA is a ring-fenced bank account held and operated by the main contractor or jointly by the parties.
Under Y(UK) 1 subcontractors and suppliers (the named suppliers) are identified by the contractor in contract data part two. Additional suppliers can be added during the contract. Payments due to the contractor from the client are deposited into the PBA. The contractor prepares and issues a payment schedule to the PBA setting out the payments to be made to the contractor and the named suppliers. Payments are made once the account holder(s) of the PBA have given their authorisation. Shortfalls in funds held in the PBA must be made up by the contractor. A trust deed executed by the client, contractor and named suppliers allows payments to be made the named suppliers in the event that the contractor becomes insolvent.
Clause Y(UK)1 is available for use with all of the NEC4 long form versions of the contract except the Design Build & Operate Contract (DBOC).
Y(UK)2: The Housing Grants, Construction and Regeneration Act 1996
The inclusion of Y(UK)2 as part of the conditions of contract ensure that the payment provisions of the contract comply with Part II of the Housing Grants, Construction and Regeneration Act (HGCRA) 1996 and subsequent amendments under the Local Democracy, Economic Development and Construction Act 2009. Where the HGCRA applies, the contract must include Y(UK)2 otherwise the law will imply the rules for payment as provided for in the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011.
The provisions of Y(UK)2 include the dates for when payments become due and the final date for payment. The clause states that the project manager’s certificate of payment is the notice of payment as defined the Act. The Act’s requirement for the client to serve notice if it intends to pay less than the notice of payment is also covered within the provisions of Y(UK)2.
Users of the contract should be aware that the term “UK” in the context of Y(UK)2 is not strictly correct. While the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) applies to England, Wales, and Scotland, it does not extend to Northern Ireland. In Northern Ireland, similar provisions are found in the Construction Contracts (Northern Ireland) Order 1997 and the Scheme for Construction Contracts in Northern Ireland Regulations (Northern Ireland) 1999 (as amended). Additionally, while Scotland is covered by the HGCRA 1996 and the 2009 amendments made by the Local Democracy, Economic Development and Construction Act 2009, it operates under a separate statutory Scheme for Construction Contracts.
Y(UK)3: The Contracts (Rights of Third Parties) Act 1999.
This optional clause allows specified third parties, who are not direct signatories to the contract, to enforce specific contractual provisions intended to benefit them. This clause can extend specific rights, provided they are included in the contract, to the beneficiaries named in the contract data. Rights could include warranties, guarantees, or indemnities. Beneficiaries may include stakeholders such as tenants, purchasers, or financial institutions.
Y(UK)3 provides a legal mechanism through which third parties can gain enforceable rights without requiring separate collateral warranties or agreements. This approach simplifies contractual arrangements; however, it does require careful drafting regarding which third parties can enforce rights and the scope of their enforcement powers to avoid unintended liabilities and disputes. The use of Y(UK)3 may be used as an alternative or in addition to secondary option X8: Undertakings to the Client and Others.
A range of other Y clauses have been published for use with NEC4 contracts in Australia, Hong Kong, Northern Ireland, New Zealand and Singapore. For example, Y(SG)1, which aligns with the Building and Construction Industry Security of Payment Act 2004 in Singapore.
David Hunter
Daniel Contract Management Services Ltd
June 2025