Apr 22, 2012

The Meaning of "Completion" (For "WORKS")

There have been many suggestions of opinion as to what constitute “completion” and the use of some phrases in certain standard forms of building and construction contracts such as “practical completion” and “substantial completion”. 

The completion of the works comprised within a contract is important as not only it has a direct effect on the question of whether the owner of the project can impose liquidated damages on the contractor, but it also usually marks the transfer of certain risks of certain rights between the contractor and the owner of the project. 

Further, and as an additional example to point up the importance of the meaning of “completion”, it may also be used to ascertain the extent of the right to payment in those contracts which provide for progress payments.  In most standard contract forms, “completion” also indicates the commencement of defects liability period.

On the date of practical completion a Completion Certificate is drafted by the owner’s representative (e.g. architect or engineer), signed and distributed to all relevant parties, including the contractor, a record of handover form is signed by all relevant parties, especially the contractor.

 The owner’s representative must also ensure that all the relevant activities set out in the handover plan have been completed.

There are two contractual events relating to completion need be distinguished:
Firstly, practical completion of the works – signified by the issue of the Certificate of Practical under the specific clause of the agreement; and

Secondly, completion of the contract – indicated by the issue of the Final Certificate as provided in the agreement.

Practical completion of the works is referred to in Contract Conditions and it is a date determined by the client’s representative when he is required to issue a certificate clearly stating that the contract has reached this specific stage.
Do you kow that in determining the date of practical completion, the client’s representative should be completely satisfied with the answers the following questions:
(i)   Has the work been carried out in accordance with the requirements of the agreement and Client’s representative’s Instructions?
(ii) Is the building or mill etc. in a suitable state to be taken over by the client for its full and proper use?

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