Finishing School

“What happens at practical completion?” asked the lecturer of his management students. “We all go down the pub,” came the swift reply. But practical completion is more than an excuse for a rowdy celebration.

Under the main JCT contract form, it is required that practical completion (PC) be certified when, in the architect’s opinion, practical completion of the works has been achieved. The contractor must have complied with any requirement to issue ‘as built’ information and to furnish the CDM co-ordinator with any information that he may require from the contractor or his sub-contractors.

The JCT Major Project Form stands alone in providing criteria for judging when PC has been achieved. The contract states that statutory requirements and approvals must have been achieved, that neither the existence nor the execution of any minor outstanding works will affect its use, that any essential specific requirements have been satisfied and that all health and safety and ‘as built’ information has been supplied.

This anomaly left the courts to determine what is meant by the term ‘practically complete’. In the case of J Jarvis & Sons v Westminster Corporation, the court’s view was that no defects must be apparent at the date on which the certificate is issued. They reasoned that the contract provided for defects be corrected during the liability period, and then only those ‘which shall appear’. It follows that a defect which is known about prior to the issue of a PC certificate must delay its issue.

To enable the works to be declared complete at a state of practical completion, there must be a diminution in the definition of the term complete. It is now understood to mean that, at PC, the works are deemed complete, save for trivial defects that will not affect beneficial occupation. This is important, for while the building contract regulates matters between the employer and his contractor, practical completion also has a bearing on the occupant. A lease might provide a new tenant with a rent-free period which will enable him/her to undertake a fit-out. Coincidentally therefore, it also establishes the date when rent becomes due. The tenant, during this period, should enjoy free access to the site. At this stage, liability for the payment of liquidated damages ends.

The NEC 3 contract manages completion differently. The project manager decides the date of completion and, within a week, so certifies. Completion is defined as having taken place when the contractor has done all that the Works Information states he has to do and has corrected any notified defects which would have prevented the employer from using the works and others from doing their work. Failure to record what is required to be finished by the time completion occurs within the works information is accommodated, to the contractor’s benefit.

So significant is this date, the current DOM 1 form of subcontract requires the subcontractor to inform the main contractor when “in his opinion, the subcontracted works are practically completed”. The main contractor can dissent, either to agree another date or ultimately, to acknowledge that PC has occurred on the date the architect has so certified.

If subcontractors are so keen to establish this date, why is it that main contractors are so reticent to formally release this information to the supply chain? The obvious answer is that it marks the end of their ability to continue to withhold 50% of the retention fund. Practical Completion also signals the end of the architect’s authority to issue variations; works that are complete cannot be varied. Any additional works may be the subject of a new contract.

The PC certificate can be seen to mark the beginning of the end. We have noted that PC denotes the start of the defects liability period and the right to have half the retention released. It also signifies that the contractor’s obligation to insure the works ends; the risk passes from occupier to owner. So it’s unlikely that completion will occur just before a public holiday or weekend.

Other important issues occur. Regular interim certificates cease to be issued, the period for the architect’s final review of the contract period begins and the liability for damage caused by frost expires.

When all that is achieved, perhaps you can celebrate!

Paul Jackson is advisor at the ECA’s commercial, contracts and legal department.