| Date | 27 September 2000 |
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| Judgment | Various |
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| The Issue | Difficulties surrounding the definition of completion in construction and engineering contracts. |
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| Implication |
Careful attention to the provisions of the contract is required to ensure that parties' interests are protected at the completion statges of any project. |
printThe law and practices in relation to the completion of building and engineering projects are complex issues that often given rise to conflict. There is little case law that gives clear guidance to practitioners. Moreover, there is a considerable number of different approaches to the certification of completion in standard forms of contract. Clause 17.1 of JCT 98 provides that "when in the opinion of the architect practical completion of the works is achieved ……he shall forthwith issue a certificate to that effect". The whole issue therefore depends upon the Architect or Contract Administrator's opinion or discretion. The ICE forms of contract, by contrast, provide a framework for completion which reflects better than the JCT forms what actually happens in practice. Under the ICE forms the contractor offers up the works and a process is provided for dealing with outstanding works and defects. These two forms are to be contrasted with the approach taken by the I Chem E which recognises that in large process plant projects, the concept of completion and taking over have distinctly separate ramifications, both from contractual and safety points of view. The procedures outlined in the I Chem E forms are therefore closer to a true contractual definition of completion than can be found in any other standard form. Thus under clause 33.1 of the Red Book for example, the project manager and contractor must sign a construction completion report when the plant has satisfactorily completed tests set out in the specification. The various standard forms differ in their treatment of the transfer of rights and obligations between the parties at completion. The following issues are however common to most forms: · Liability to pay damages for delay cases · Possession of the site returns to the employer and the risk of damage to the works and third party liability transfers back to the employer · The defects liability period commences · Payment falls due to the contractor of one half of the retention fund · No further instructions may be issued for variation works or the rectification of works other than those appearing during the defects liability. Many of these factors will also impact upon subcontractors. For example, the subcontractor's protection under the main contract all-risks policy ends at completion. In addition to such contract mechanisms, the issue of a certificate of completion may have direct impact upon third parties such as, for example, to bring an end to the obligations of a surety in respect of a guarantee or performance bond. The courts have examined completion on a number of occasions and an understanding of the practical difficulties appears to have developed over the years. In 1970 in the case of City of Westminster -v- J Jarvis & Sons Ltd the House of Lords appeared to lean towards perfect, fault fee completion. "One would normally say that a task was practically completed when it was almost but not entirely finished; but Practical Completion suggests that is not the intended meaning and what is meant is the completion of all the construction work that has to be done". In 1982 this rather strict impression was diluted in the case of H W Neville -v- William Press & Sons where it was said; "I think the word practically ….. gave the architect a discretion to certify that the contractor had fulfilled its obligation …. where very minor de-minimis work had not been carried out, but that if there were any patent defects in what the contractor had done the architect could not have given a certificate of practical completion." More recently in 1991 in the case of Emson Eastern -v- E M E Developments the late Judge John Newy said; "because a building can seldom if ever be built precisely as required by drawings and specification, the contract realistically refers to 'practical completion' and not 'completion', but they mean the same. If, contrary to my view, completion is something which occurs only after all defects, shrinkages and other faults have been remedied and a certificate to that effect has been given, it would make the liquidated damages provision unworkable". Two further cases highlight the difficulties that can be faced. In George Fisher Holdings Ltd -v- Multi Design Consultants in 1998 the court did not accept the consultant's defence that because it had qualified its completion certificate by a list of reserved matters, this certificate should not have been taken to be the completion certificate required by the terms of the contract. On the contrary, the court found that by annexing a list of defects or outstanding works, the certifier was confirming that such outstanding matters were consistent with the achievement of completion. More recently this year in Environment Agency -v- Hillson Moran, a consultant was held liable under a collateral warranty to a future owner for breach of a term to exercise "all proper professional skill and care" as it had represented in a letter to the architect that the mechanical and electrical works were complete, when in fact they were not. Hudson's Building and Engineering Contracts 11th edition probably provides one of the clearest summations. "Usually it (completion) will mean bona fide completion free of known or patent defects so as to enable the owner to enter into occupation. The words 'practical' or 'substantial' in English standard forms probably do no more than indicate that trivial defects not affecting beneficial occupancy will not prevent completion (the more so of course if the contract provides for a maintenance or defects liability period)".
CJ-0038
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