Last edited 20 Aug 2019

Practical completion

The contract administrator certifies practical completion when all the works described in the contract have been carried out. Practical completion is referred to as 'substantial completion' on some forms of contract, particularly in the United States.

Certifying practical completion has the effect of:

Documentation that should be issued to the client on certification of practical completion might include:

Once the certificate of practical completion has been issued, the client takes possession of the works for occupation.

There is no absolute definition of practical completion and case law is very complex. There is some debate about when practical completion can be certified and whether it can be certified where there are very minor (de minimis) items 'not affecting beneficial occupancy' that remain incomplete.

It is important to note however, that the defects liability period, which follows certification of practical completion, is not a chance to correct problems apparent at practical completion, it is the period during which the contractor may be recalled to rectify defects which appear following practical completion. If there are defects apparent before practical completion, then these should be rectified before a certificate of practical completion is issued.

This can put the contract administrator in a difficult position, as both the contractor and the client may be keen to issue the certificate (so the building can be handed over), and yet defects (more than a de minimis) are still apparent in the works. Issuing the certificate could render the contract administrator liable for problems that this causes, for example in the calculation of liquidated damages, the position in relation to performance bonds and the release of retention when it is not certain that the works will be completed.

If the contract administrator is put under pressure to certify practical completion even though the works are not complete, they might consider informing the client in writing of the potential problems of doing so, obtaining written consent from the client to certify practical completion and obtaining agreement from the contractor that they will complete the works and rectify any defects. If the contract administrator is not confident about the potential problems, they may advise the client to seek legal advice.

On construction management contracts, a separate certificate of practical completion must be issued for each trade contract. Once all trade contracts (or all trade contracts for a particular section of the works) have been issued, the construction manager issues a certificate or project completion (or sectional completion). The same is true on management contracts, where each works contract must be certified individually.

Practical completion is not a term recognised in some recently developed contracts such as PPC 2000 and other partnering contracts which simply refer to 'completion'. This can put the contract administrator in a difficult position as to when the project becomes 'useable' by the client.

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.

NB: Sectional completion refers to a provision within construction contracts allowing different completion dates for different sections of the works. This is common on large projects that are completed in sections, allowing the client to take possession of the completed parts whilst construction continues on others. Sectional completion differs from partial possession in that it is pre-planned and defined in the contract documents.

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