Parts of the Court of Appeal's ruling on the final settlement for Nye Jordal Amfi set aside

In 2016, Oslo municipality announced a design and build contract for the demolition of the old ice hockey arena and the construction of Nye Jordal Amfi through a public tender. NCC Norge AS was awarded the contract, which was based on the standard contract NS 8407.

Several issues caused delays and additional work, including the discovery that the Hovinbekken stream, which ran through a culvert (Hovinkulverten) beneath the old arena, was situated higher in the ground than initially assumed. It also became necessary to activate three options related to handling soil contamination.

A key question before the Supreme Court was whether Oslo municipality had exceeded the 15 percent net increase limit on the contract sum for changes imposed on NCC, and how compensation for work beyond that limit should be determined.

The Supreme Court concluded that the term “change” in NS 8407 clause 31.1 refers specifically to instructions from the client that deviate from the original agreement, including interference with the contractor’s discretion. Additional work resulting from risks borne by the client does not fall under the definition of a “change,” except for a specific rule in the contract regarding quantity deviations in adjustable items. Only the additional costs directly resulting from the change—i.e., the deviation from the contract—should be included in the 15 percent calculation. Contractual options exercised by the client are not included in this calculation unless there is evidence that the parties intended otherwise. The judgment provides guidance, based on general contract law principles, on how to determine the price for change work exceeding the 15 percent threshold.

The Supreme Court established that if the contractor fails to specify and document invoices as required by NS 8407 clause 27.4, the client is generally entitled to withhold payment, and interest on late payment does not accrue. This presupposes that the client makes reasonable efforts to resolve the issue, typically by raising objections before the payment deadline. What constitutes reasonable effort depends on the circumstances, including whether the invoice is clearly undocumented.

The Court of Appeal’s judgment was set aside due to potential legal errors in its reasoning. The Court of Appeal was thus to reassess the relevant parts of the dispute based on the Supreme Court’s legal guidance.

Two justices dissented. While they agreed with the majority’s general reasoning, they disagreed on the treatment of the options, which they considered to be changes included in the 15 percent calculation. They also found the Court of Appeal’s interpretation of which claims should be included in the 15 percemt limit to be correct, and saw no basis for setting aside that part of the judgment.

The judgment clarifies the scope of the term “change” in NS 8407 clause 31.1 and the consequences for interest on late payments when the client fails to object to insufficiently documented invoices.

Read the whole judgment (Norwegian only) (PDF)

Area of law: Contracting. NS 8407

Key paragraphs: 71, 74–75, 84–88, 114

Justices: Falkanger, Arntzen, Hellerslia, Stenvik, Poulsen