ON DEMAND - Legal Review: Property and Environment Act
Jan 21 2022
We highlighted the key topics in property from the last 12 months, including service charge developments, electric vehicles and the Environment Act 2021.Read More
Practical completion signifies a turning point in the lifecycle of a construction project where the employer is able to occupy the ‘completed’ property after the design and build phase and when the maintenance phase of the project begins. Significantly, practical completion can also instigate the defects liability period, and often, the starting point for calculating liquid ascertained damages (LADs) (where applicable) for the contractor. For the employer, it will often require the payment of some or all retention moneys.
Agreeing on whether or not practical completion has been achieved is a common cause of dispute in the industry. Defining ‘practical completion’ is tricky as there is no agreed definition in standard forms and there is a lack of guiding case law.
Practical completion will usually be marked by the delivery of a completion certificate from the persons acting on behalf of the employer (an architect, contract administrator etc.). This ‘certifier’ will usually inspect the works alongside a representative of the contractor before making a decision based on the material condition of the site and in their judgement. Where assessing practical completion, it is necessary to consider:
Standard form contracts - relevant sections
University of Warwick v Balfour Beatty Group Ltd.
This case offers important clarity into this subject area, where the employer, University of Warwick, sought the courts assistance for defining ‘practical completion’.
In this case, an amended JCT 2011 Design and Build form of contract (with amendments) was entered into by the parties which allowed sections (of which there were 4 in total) within the project to be signed off as practically complete before the works as a whole had been signed off.
Clause 1.1 defined ‘practical completion’ as a stage of completeness “of the works or a section” permitting the employer to occupy or use the property. ‘Property’ was defined as “the property comprised of the completed works”. Clause 2.27.1 was amended to read:
“2.27 When Practical Completion of the Works or a Section is achieved and the Contractor has sufficiently complied with clause 2.37 and 3.16.5, then:
and Practical Completion of the Works of the Section shall be deemed for all the purposes of this Contract to have taken place on the date stated in that statement.”
Clause 2.29 entitled the employer to liquidated damages if the works as a whole or a particular section failed to attain a completion certificate by the Completion Date (as fixed by the Contract Particulars), with a separate liquidated damages figure for each section defined in the Contract Particulars.
Balfour Beatty claimed that because it was not possible to separately achieve Practical Completion of a section prior to Practical Completion of the whole of the Works, then the liquidated damages provision was inoperable. This argument was favoured in adjudication as one facility could not be used or occupied by the employer until all other sections had been completed.
However, the court overruled this decision stating that a contractual interpretation should focus on the words used by the parties in the contract, and not what the parties should have agreed to given their commercial interests.  The court said that it was necessary to identify what a reasonable person would have understood the words in the contract to mean, rather than ignore the words of the contract and import words that had not been used in order to achieve what it thinks the real intentions may have been.
The parties had chosen to complete the Contract Particulars to provide for different Completion Dates for the 4 Sections and specified different liquidated damages for those sections for late completion. The Court found that the ordinary interpretation of clause 1.1, 2.27 and 2.29 which reference “works or a section” indicated that completion of certain sections could occur before completion of the works as a whole. Drafting the words separately suggested that “the works” and “sections” were not to be considered interchangeable. The court found, in addition, that the amended drafting to the standard form JCT D&B contract supported the assertion that there was clear intention for the parties to achieve practical completion in this staged process.
Whilst the Court’s finding seems clear and obvious when reflecting with hindsight, there are lessons to be taken from this case including:
Article written by David Arnold and George Riach.
 Westminster City Council v J Jarvis & Sons  1 All ER 943
 Nevill (H W) (Sunblest) Ltd v William Press & Son (1981) 20 BLR 78
 University of Warwick v Balfour Beatty Group Ltd.  EWHC 3230 (TCC)
 Arnold v Britton  UKSC 36