Practical Completion
You are probably familiar with the term ‘practical completion’. This is what’s used in JCT contracts; NEC contracts use the term ‘completion’ for the same thing. Broadly speaking, it refers to when the completion of the works on a construction project can be certified as complete.
What you may not know is that there is no precise legal meaning of ‘practical completion’, despite various judges having attempted to define it over the years. As a result, we often see disputes about whether or not practical completion has actually been achieved.
It is generally a question of fact that turns on what the contractor agreed to supply and whether or not that has been supplied.
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Why Is Practical Completion Important?
Practical completion marks a significant point in the timeline of a construction project. Pinpointing whether – and when – practical completion has occurred is significant for several reasons:
- The risk of loss or damage and the responsibility for the works transfers from the contractor to the employer. Also, if the contractor has insured the works, the insurance risk now passes to the employer.
- Practical completion brings to an end any right the employer may have to claim liquidated and ascertained damages (see below) for delay to the works.
- The employer has to pay a proportion of any retention monies. This is usually 50%.
- The defects liability period (or rectification period) begins.
What Stops Practical Completion?
Practical completion cannot be certified if there are obvious defects in the works. It also depends on the nature and purpose of the works. For instance, if a project involves plant or processing facilities, these will require their own commissioning and testing to confirm specifications have been met.
The Benefits Of Practical Completion
There are advantages to practical completion for both the contractor and the employer:
- For contractors, it means they’re no longer liable for liquidated damages, the defects liability period begins, and the insurer takes over the insurance obligations.
- Employers can take over the facility and potentially start generating income.
That’s why both parties will sometimes certify practical completion when there are snagging issues or minor defects still to be rectified.
What If You Miss The Completion Date?
Unless a contractor has applied for and been granted an extension of time, it will be in breach of contract if it fails to meet the completion date.
Depending on what the contract allows, there are several potential actions an employer can choose to take:
- Claim general damages
- Enforce a liquidated damages clause
- Terminate the construction contract and appoint another contractor to complete the works
Find out more about extensions of time, loss and expense claims, and liquidated damages here. <hyperlink ‘here’ to Delay page>
Altion Law are specialists in advising and representing parties on commercial construction contracts, claims and disputes.
For a confidential and free discussion, call us today on 01908 414990. Alternatively, email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
