Completion date in construction contracts
Most construction contracts set a date by which the works described in the contract must be completed. This is not the date by which all obligations under the contract have to be discharged, but the date by which 'practical completion' must be certified. That is, the date by which the works have been completed and the client can take possession of the site, albeit there may be very minor items outstanding that do not affect beneficial occupancy by the client.
Certifying practical completion (referred to as 'substantial completion' on some forms of contract) returns possession of the site to the client, releases half of the retention, ends the contractor's liability for liquidated damages and signifies the beginning of the defects liability period. The defects liability period (sometimes called the rectification period) typically lasts six to twelve months during which the client may occupy the premises and the contractor must rectify any defects that are identified.
The completion date may be altered during the course of the contract, for example if the date the contractor takes possession of the site to begin construction is delayed, or if an extension of time is granted due to delays to the works that are not the contractor’s fault. Practical completion therefore must be certified by the most recently agreed completion date.
If practical completion is not certified by the most recently agreed completion date, then the contractor may be liable to pay liquidated and ascertained damages to the client. These are pre-determined damages set at the time that the contract is entered into, based on a calculation of the actual loss that the client is likely to incur if the contractor fails to meet the completion date. Some contracts require that a certificate of non-completion is issued as a pre-requisite to deducting liquidated and ascertained damages.
Where the contract requires sectional completion of the works, then separate dates for completion and separate rates of liquidated and ascertained damages should be set for each section. NB There can be a cascade effect, where delays in one section cause delays in another. The contractor may then be liable to pay liquidated and ascertained damages for each section.
On construction management contracts, a separate completion date must be set for each trade contract. Once all trade contracts have been certified as practically complete, the construction manager issues a certificate or project completion. The same is true on management contracts, where each works contract must be dealt with individually.
- A draft building owner's manual.
- A building user's guide.
- The health and safety file.
- The building log book.
- A construction stage report.
- If a contract does not specify a completion date, then the works should be completed within a reasonable time, although it is unlikely that such an ambiguous arrangement would allow the client to deduct liquidated and ascertained damages.
- Construction contracts will generally include a provision requiring that the contractor proceeds ‘regularly and diligently’ irrespective of whether it is apparent that the completion date will be achieved.
- Practical completion is not a term recognised in some recently developed contacts such as PPC 2000 and other partnering contracts which simply refer to 'completion'. See practical completion for more information.
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