Are We Finished Yet?

When dealing with construction projects, the answer to this seemingly simple question is not actually that simple. Are you asking if the works are complete, or if all contractual obligations have been discharged? This article will explore the, sometimes woolly, concept of completion in relation to construction projects including practical completion, sectional completion, partial possession and even early access.

Completion

Under the terms of most construction contracts, completion means the date when the works described under the contract have been completed. Unfortunately, there is no definitive legal definition of completion. It is therefore a matter for the Architect or Contract Administrator to decide if the works are complete based on their professional opinion. In most cases, completion is deemed to mean that there are no outstanding defects, except for minor ‘snagging’ items, and the client can have a beneficial occupation and use of the site.

Practical Completion

Practical Completion is the term used most frequently to describe the completion of all the works described in a contract. Achieving Practical Completion is incredibly important, not only because it means the works are complete, but also for the following contractual and legal reasons:

  • the Contractor is entitled to the release of a portion of the retention monies, normally half;
  • the Contractor’s liability for Liquidated Damages, for failing to complete the works on time, ends;
  • the Defects Liability or Rectification Period commences;
  • the Insurance responsibility for the site transfers from the Contractor to the Client;
  • the Risk for Loss or Damage also transfers from the Contractor to the Client;
  • the Contract Administrator can no longer instruct the Contractor to carry out variations;
  • the Final Account provisions are usually triggered.

Projects aren’t always that simple though. Often the client will want to have sections of the works complete at different times to make use of, or sell off, those sections in advance of Practical Completion of the whole project. There are two mechanisms used to achieve this, Sectional Completion and Partial Possession.

Sectional Completion

Most Standard Form Construction Contracts allow for the concept of Sectional Completion, which involves the splitting of the works into different sections with separate:

  • completion dates;
  • contract sums;
  • and liquidated damages provisions.

This allows the client to take possession of sections of the work in advance of the completion of the full project. Sectional Completions are, in effect, Practical Completions for sections of the main project. Therefore, many of the same contractual mechanisms are activated on Sectional Completion as Practical Completion, including:

  • release of a portion of retention monies;
  • end of liability for Liquidated Damages for the section;
  • Defects Liability or Rectification Period commences;
  • Insurance responsibility & risk for loss and damage to the section transfers to the client.

Partial Possession

Partial Possession is a more fluid contractual mechanism than Sectional Completion that is available in some Construction Contracts. In the same way as Sectional Completion, it allows for the client to take possession of a completed section of the works in advance of Practical Completion. However, there are some distinct differences. The sections are not defined in the Contract and so Partial Possession is a more consensual process. The Contractor must consent to Partial Possession of a section of their site, although it cannot be unreasonably withheld. The Contractor needs to consider the Health & Safety implications, access concerns and whether there is likely to be an impact on the overall programme by allowing Partial Possession before agreeing.

When agreeing Partial Possession of a section of the works, it is important to agree the value of that Section. Once Partial Possession has been agreed upon, it is almost identical to Sectional Completion and achieving it activates the same contractual mechanisms as described above for Sectional Completion.

Early Use by Employer

Finally, the JCT Suite of Contracts also allows for early use by the Employer “for storage or otherwise”. Like Partial Possession, the Contractor must give their consent for early use and it cannot be unreasonably withheld. Unlike Partial Possession, early use does not trigger Practical Completion of any section of the works so there is no release of retention and the risk of loss or damage still lies with the Contractor. Early use is sometimes difficult to distinguish from Partial Possession and for this reason, it can easily lead to problems. If the Client causes any delay or disruption through early use, then the Contractor can bring claims for extensions of time and loss and/or expense.

Conclusion

When asking “Are we finished yet?” there are a lot of things to consider.

  • Has the Client taken exclusive possession of a part of the site? Then you’ve probably finished that section and you should have a Completion Certificate for that part of the site;
  • Has the Client taken exclusive possession of the whole site? Then you’ve probably finished the works and should have a Practical Completion Certificate;
  • How long is the Defects Liability or Rectification Period? You will still be liable for defects that appear during this period;
  • Has the Defects Liability or Rectification Period ended, and do you have your Making Good Defects Certificate? Then you should be finished.
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