Page 45 - Interactive report Ar Site Practice

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.

WHY IT IS SO IMPORTANT?

Practical completion of a project is of huge commercial and legal importance. The
date of practical completion (usually stated in a practical completion certificate) is
the date on which the operational period of a project will start.

It also has a number of contractual and legal implications:

1. It ends any right to liquidated damages in respect of a delay to the works;
2. The employer must pay a percentage of any retention monies (usually 50%) to the
contractor; The health and safety file.
3. The “defects liability period” commences from practical completion ;A construction stage
report.
4. The risk of loss or damage to (and responsibility for) the works usually transfers from the
contractor to the employer;
5. The contract administrator may not instruct the contractor to carry out variations after
practical completion; and
6. It may trigger other consequences under the contract (such as the “final account”
provisions under a JCT contract).

SO, WHAT PRACTICAL ISSUES DO I NEED TO CONSIDER?

The requirements for practical completion vary from project to project. Disputes as to
whether or when practical completion has been achieved are common but can be avoided by:

1. checking that the building contract is clear on when practical completion has occurred
(including where practical completion is deemed to have occurred); and
2. keeping a paper trail documenting acceptance of possession, partial possession or agreement
for early access, as appropriate.

Finally, if you are amending a standard form building contract to make the test for
achieving practical completion more stringent, you should consider whether this is in the
best interests of the employer; a stringent mechanism can sometimes backfire.