CONSTRUCTION LAW AND CONTRACT I Faculty of Built Environment Department of Quantity Surveying CONSTRUCTION LAW AND CONTRACT I SBEQ 2413 Dr. HAMIZAH LIYANA

COMPLETION OF WORK

Completion of Work Introduction Completion may be considered, under the law of contract, under two main topics: ‘Performance’ by promisor; and ‘Discharge’ by ‘performance ‘Completion’ of manufactured products is a straight forward subject: Completion of manufactured goods However, ‘completion’ in construction works appears to be one of the main issues in construction disputes. Standard forms of construction contracts contain express provisions that deal with completion. Contract Act 1950

Completion of Work Dictionary “complete” – with nothing missing or lacking – finish – absolute – entire” Completion of construction works – there seems to be no specific and clear definition of completion for construction work. The contractual provisions set out the conditions and procedure for determining the attainment of completion.

Certificate of substantial completion Completion of Works Completion, as pointed out by Murdoch and Hughes (2008) is rarely a clear cut affair or business. When the work is substantially complete, a certificate is issued, known variously as: Certificate of substantial completion Certificate of practical completion Taking over certificate

Completion of the Works Completion, mark the point of the beginning of a period during which the Contractor has the right and responsible for remedying any defect that become apparent in the completed project. The period is variously known as: Defect Liability Period (PAM, PWD) Rectification Period Defect Correction Period Defects Modification Period (FIDIC) Maintenance Period ** (misnomer)

Completion of the Works Completion is a vague concept. A building project can be handed over to the owner in a less than perfect state. It may be to the advantage of both the owner and the Contractor. What does “completion” mean? Literally, the contactor must carry out and complete all the work shown on the drawings and specified in the specification and described in the BQ. A contractor then, cannot be said to have totally performed the contract if a single item of work is missing or defective.

Completion of the Works From practical point of view, to delay a handover of a large complex for a trivial breach would cause enormous inconvenience. As a result most building contract requires the Contractor to bring the works to a state described by such expression as “ PRACTICAL COMPLETION ” (as in JKR203A 2010 and PAM 2006) or “SUBSTANTIAL COMPLETION” (as in ICE 7) Whether the building is “complete” or not, is normally the decision of the Contract Administrator - based on an inspection of the works and - the exercise of judgment* * An issue of judgment

Completion of the Works What is considered as practically completed or substantially completed is an issue of judgment. In Westminster CC v Jarvis & Sons Ltd., Salmon LJ described practical completion from a very functional and liberal approach. He described practical completion as “Completion for all practical purposes, that is to say for the purpose of allowing the employers (the owners) to take possession of the works and use them as intended.” On appeal of the same case, Lord Dilhorne took a much stricter line that: “What is meant by practical completion is the completion of all the construction works that has to be done”

Completion of Work Lord Salmon “The obligation on the contractors under clause 21 to complete the works by the date fixed for completion must, in my view, be an obligation to complete the works in the sense in which the words ‘practically completed’ are used in clause 15 and clause 16 of the contract. I take these words to mean completion for practical purposes, i.e. for the purpose of allowing the council to take possession of the works and use them as intended. If completion in clause 21 meant down to the last detail, however trivial and unimportant, the clause 22 would be a penalty clause and unenforceable.”  20/11/2018

Lord Viscount Dilhorne Completion of Work Lord Viscount Dilhorne “The contract does not define what is meant by Practical Completion. One would normally say that was practically completed when it was almost but not entirely finished, but practical completion suggests that this was not the intended meaning and what is meant is the completion of all the construction that has to be done… The defects liability period is provided in order to enable defects not apparent at the date of practical completion to be remedied. If they had been apparent, no such (practical completion) certificate would have been issued.”. 

Completion of the Works Many would undoubtedly favour the more liberal and practical approach described by Salmon LJ rather than the stricter notion by Lord Dilhorne The PWD form of contract does not provide a precise definition of practical completion. In PAM98, it is stated in Clause 15.1 that: “Practical Completion means when the contractor has performed and completed all the necessary Works Contract and the patent defects existing in such works are “de minimis”. PAM 98

Completion of the Works PAM2006, provides a much clearer definition of the meaning of Practical Completion when it states that: 15.1 - the Works are Practically Completed when 15.1 (a) in the opinion of the Architect, the Employer can have full use of the Works for their intended purposes, notwithstanding that there may be works and defects of a minor nature still to be executed and the Contractor has given to the Architect a written undertaking to make good and to complete such works and defect within a reasonable time specified by the Architect and 15.1(b) other reqirements expressly stated in the Contract Documents as a pre-requisite for the issuance of the Certificate of Practical Completion have been complied with.

Certificate of Practical Completion JKR 203A (2010) - Clause 39 - Completion of Works Certificate of Practical Completion 39.5 The shall not be regarded as PRACTICALLY COMPLETED unless it has fulfilled the following: a) The Works have been completed in accordance with the terms and conditions of this Contract. b) The Government can have full, proper and beneficial use of the Works for their intended purpose, notwithstanding that there may be works of very minor defects PROVIDED THAT such works do not prevent or diminish the full, proper and beneficial use as aforesaid;

Certificate of Practical Completion JKR 203A(2007) - Clause 39 - Completion of Works Certificate of Practical Completion 39.5 The shall not be regarded as PRACTICALLY COMPLETED unless it has fulfilled the following: The Works have passed any commissioning tests required in the Contract Document; The Works shall be made available to the Government in a condition fit for occupation; All the essential services, including access roads, landscape, car parks, drains, sanitary, water and electricity installation, fire hydrant, sewerage and refuse disposal equipment and fire lifts specified in this Contract.

Completion of Work PWD 2010 CLAUSE 39 Completion of works CLAUSE 40 Damages for non-completion CLAUSE 41 Sectional completion CLAUSE 42 Partial possession/Taking over by Government CLAUSE 48 Defects after completion CLAUSE 31 Preparation of final account CLAUSE 38.3 Date calculation of completion period CLAUSE 13 Performance bond

Completion of Work PAM 2006 CLAUSE 15 Practical completion and defects liability period CLAUSE 16 Partial possession by employer CLAUSE 21 Date of commencement, postponement and date for completion CLAUSE 22 Damages for non-completion CLAUSE 30.6(c) Retention fund CLAUSE 30.10 Final account CLAUSE 37.1 Performance bond

Procedure PWD 2010 Clause 39 – Completion of works PAM 2006 Clause 15 – Practical completion and defects liability period

Any Difference ? PAM 2006 Form Term : Practical completion Full use of their works for their intended purpose. Minor outstanding works and defects permitted Contractor must give written undertaking to complete outstanding works still to be executed and make good defects PWD203A Form Term : Practical completion Extensive criteria to be satisfied Completion to S.O’s satisfaction Minor defects permitted Defects are not Outstanding Works!!

What is Practical Completion? See: Mariner International Hotel Sino Land Company v Atlas Ltd Hang Lung Group (2007) “..a state of affairs in which the building has been completed free from any patent defects other than ones to be ignored as trifling” – Court of Final Appeal This is possibly a rather more exacting standard than the standard which tends to be applied in practice in Hong Kong where a practical completion certificate is typically issued when the work reaches a state of readiness for use or occupation even though there is a long list of patent defects and outstanding works yet to be carried out which are arguably non-trifling.

What do contract form say? PAM2006 Form When employer can have full use of works for their intended purpose Minor works still to be done and defects excepted Compliance with other pre-requisites as specified in contract PWD203A 2010 Completion in accordance with the contract Full, proper and beneficial use for intended purpose Passed commissioning tests Condition is fit for occupation Completion of essential services

The beginning of the Defect Liability Period or Rectification Period The Effect/Significance of Completion When the Contract Administrator (S.0 or the Architect or Client Representative) certifies that the Works have been completed, the effect (typically) as follows: The Employer is entitled and obliged to take possession of the Works/site. The beginning of the Defect Liability Period or Rectification Period The Contractor’s responsibility to insure the Works comes to an end. Obligation to make good defects starts.

The Effect/Significance of Completion 5. Any liability of the Contractor to pay damages for late completion ceases. 6. The Contractor is entitled to the release of half of the accumulated retention money. 7. No further variations can be issued. 8. The beginning of the process of preparation the Final Account

PARTIAL POSSESSION

Partial Possession Introduction Once an employer has given possession of site to a contractor for the purpose of carrying out of construction work, the contractor gets an exclusive and uninterrupted occupation and possession of the site. The contractor shall thereafter regularly and diligently carry out and complete the construction works. The contractor shall give the employer possession of the completed work when the contract administrator issues the certificate of practical completion. The employer can only get back the site when the work is completed.

Partial Possession Introduction In practice, it is not always the case that the contractor completes the whole of the construction work all at once. This is particularly in relation to housing projects, high-rise/multi- storey projects, road works, etc. In relation to that, it is submitted that, there may be occasion when the employer may wish to take possession of the completed parts. However, this is not quite possible without the contractor's assent. In addition, there may be other legal complications with the effective application of certain clauses.

Partial Possession Introduction An unaccommodating contractor may not be willing to agree to such request. In order to facilitate such eventuality, most standard forms of construction contracts contain express clauses that make it possible for employer to take possession of the completed parts. The clauses are generally called ‘partial possession’. They are not similar with ‘sectional completion. They set out the conditions and procedures for the event.

Partial Possession Legal Basis The contractor’s right to possession of site for the purpose of carrying out the construction work is normally with respect to the whole of the construction site. In addition, the contractor’s right with respect to the site is also irrevocable except in the event of valid termination of the contract. If the employer intends to retake possession of the site, it appears, it must be retaken with the contractor’s consent.

Partial Possession Legal Basis Or if the employer plans to take possession of the completed parts, this should be made clear from the tendering stage by using the section completion clause. The ‘Partial Possession’ clause is a contractual mechanism (similar to variation order clause) that permits the employer to take from the contractor possession of the completed parts.

Contractual Provisions Partial Possession Contractual Provisions PWD 2010 Clause 42 Partial Occupation/Taking Over by Government PAM 2006 Clause 16 Partial Possession by Employer

Partial Possession Analysis The clauses give right to the employer to take from the contractor partial possession of the completed parts (PWD 2010, clause 42.1; PAM 2006, clause 16.1). The taking possession can only be possible with the contractor’s consent. The contractor may not unreasonably delay or withhold his consent. The contract administrator will issue CPC with respected to the parts. DLP for the parts begins on the issue of the CPC.

Sectional Completion & Partial Possession Sectional completion refers to a clause in the contract that allows different completion dates for different sections of the works. it allows the employer to take possession of the completed parts whilst construction continues on others. Sectional completion differs from partial possession. In former, it is pre-planned and defined in the contract documents and appendix. In the latter, it is not pre-planned. If sectional completion is required, it must be express in the contract and specified in the appendix:

Sectional Completion & Partial Possession Sectional completion requires particular care to be taken regarding: Difficulties with logistics on site when different sections are in the possession of different parties. The protection of completed sections. The provision of appropriate insurance at all times for all sections. The adoption of appropriate health and safety measures to deal with risks resulting from occupation of areas adjacent to, or only accessible through ongoing construction works.

Sectional Completion & Partial Possession Matters specified in the appendix: Dates of possession of sites for each section; Date of completion for each section; The amount of LAD for each section; and Delays and extension of time and knock-on effects on other sections.

Procedure Partial Possession by the Employer. This applies to the situation where the employer wishes to take possession of any part of the works and the contract does not contemplate such requirement. In this situation, the employer must: Notify the contractor his intention and obtain the contractor's consent; Identify the Relevant Part; Fix the date of taking partial possession; Make adjustment to the followings: Adjust:

Procedure Partial Possession by the Employer. Make adjustment to the followings: Issue CPC for the Relevant Part Commencement DLP for the Relevant Part Adjustment to the LAD for the uncompleted part:

Procedure Amendment to LAD clause: Partial Possession Procedure Amendment to LAD clause: “As from the Relevant Date, the rate of liquidated damages stated in the Contract Particulars in respect of the Works or Section containing the Relevant Part shall reduce by the same proportion as the value of the Relevant Part bears to the Contract Sum or to the relevant Section Sum, as shown in the Contract Particulars.”

Special thanks to: Mr. Jamaludin Yaakob Assoc. Prof. Dr. Rosli Rashid Assoc. Prof. Dr. Maizon Hashim