Failure to complete construction works

[edit] Introduction

In the construction industry, 'completion' is generally not a single event, but takes place in stages.

Most construction contracts will set a date by which the works must be completed. However, this is not the date by which all obligations under the contract have to be discharged, but only the date by which 'practical completion' must be certified.

Very broadly, practical completion is deemed to have occurred when all the construction works that are described in the contract have been carried out, and the contract administrator issues a certificate of practical completion. However, there is no absolute definition of practical completion and case law is very complex. There is some debate about whether it can be certified where there are very minor (de minimis) items 'not affecting beneficial occupancy' that remain incomplete. For more information see: Practical completion.

Practical completion is followed by a defects liability period during which the contractor may be recalled under the contract to rectify defects which appear. At the end of the defects liability period, the contract administrator prepares a schedule of defects and agrees with the contractor the date by which they will be rectified. When the contract administrator considers all the items on the schedule of defects have been rectified, they issue a certificate of making good defects.

In effect, this marks the completion of the works. There may still be latent defects, which do not appear for some time, however, the building owner no longer has a contractual right to insist that the contractor rectifies any defects, and they must instead seek redress in an action for damages, for breach of contract, or for negligence. In the case of dwellings there is a statutory remedy provided by the Defective Premises Act 1972.

The position is more complicated where the project is completed in sections or if the client arranges partial possession permitting them to take possession of part of a building or site, even if the works are ongoing or there are defects that have not been rectified.

[edit] Delays

It is not uncommon for delays to the works to cause the completion date to be missed, that is, the works are not ‘complete’ by the date set out in the contract, and so a certificate of practical completion cannot be issued.

If the contractor is not responsible for the delay, an extension of time may be granted to the contractor, the completion date adjusted, and the contractor may be entitled to claim loss and expense. For more information see: Loss and expense.

If the contractor is responsible for the delay, the client may be entitled to claim liquidated and ascertained damages (at a rate set out in the contract particulars). For more information see: Liquidated and ascertained damages.

Some contracts (such as the JCT Standard Form of Building Contract), require that the contract administrator issues the contractor with a certificate of non-completion (sometimes referred to as a ‘non-completion certificate’ or ‘non-completion notice') as a prerequisite to claiming liquidated and ascertained damages. For more information see: Certificate of non-completion.

[edit] Other contractual provisions

Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client. The purpose of retention is to ensure that the contractor properly completes the activities required by the contract. Half of the amount retained is released on certification of practical completion and the remainder is released upon certification of making good defects. For more information see: Retention.

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 claim liquidated and ascertained damages in the event of completion taking an unreasonable time.

Construction contracts will also generally include a provision requiring that the contractor proceeds ‘regularly and diligently’ irrespective of the completion date.

The phrase ‘time at large’ describes the situation where there is no date for completion, or where the date for completion has become invalid. The contractor is then no longer bound by the obligation to complete the works by a certain date. They may however still be bound by an obligation to proceed regularly and diligently or to complete the works within a reasonable time.

Most forms of contract will include termination clauses, setting out the circumstances under which a contract may be terminated. When a contract is terminated, the parties to the contract are no longer obliged to perform their obligations under the contract. Such circumstances might include:

• Refusal to carry out work.
• Abandoning the site.
• Removing plant from the site.
• Failure to proceed regularly and diligently.
• Failure to remove or rectify defective works.

However, on construction contracts, it is generally in the interests of both parties for the contract to continue and for the works to proceed irrespective of minor problems. Whilst damages for breach of contract may seek to put the innocent party in the position it would have been in had there not been a breach of contract, the delay and disruption caused, for example, by having to appoint a new contractor can far outweigh the difficulties of proceeding, albeit under difficult circumstances.

For more information see: Termination.

NB The term ‘Time is of the essence’ refers to a contractual position in which if one of the parties to the contract fails to complete their obligations by a specified date, then the other party can treat the contract as terminated. This is not generally applicable to construction contracts unless there is an express term allowing it.

[edit] Related articles on Designing Buildings

• Beneficial occupation.
• Building completion.
• Certificate of making good defects.
• Certificate of non completion.
• Certificates in the construction industry.
• Completion date.
• Completion.
• Defects liability period.
• Defects list.
• Difference between practical completion and partial possession.
• Early use.
• Extension of time.
• Handover to client.
• Liquidated damages.
• Loss and expense.
• Migration strategy.
• Occupation and defects liability period.
• Partial possession.
• Phased construction works.
• Possession.
• Punch list.
• Retention.
• Schedule of defects.
• Sectional completion.
• Snagging.
• Soft landings.
• Substantial completion.
• Time at large.
• Topping out.
• Work-to-complete list.