5 Possession and completion

5.1 The date of possession or commencement and the date for completion of the works are key dates in any building contract, and DB16 requires a ‘Date of Possession’ and a ‘Date for Completion’ to be inserted into the contract particulars. DB16 also offers the facility for the work to be carried out in phases. If phased completion is required, then the work must be split into clearly identified sections, and a separate date of possession and date for completion entered for each section. The contractor is required to take possession on the date of possession and complete by the date for completion, and failure to do so may give rise to a liability for liquidated damages. Provisions exist for deferring the date of possession, and extending the completion date. If the work is divided into sections, provisions for commencement, completion, deferment and extension operate independently for each section.

5.2 Although the employer may state preferred dates at the time of tendering, it is likely that in design and build procurement the dates will be subject to negotiation. Nevertheless, these should be finalised before the contract is entered into and before the contractor commences work. In the event that work is started before dates are finally agreed, the contract will be subject to the Supply of Goods and Services Act 1982 or the Consumer Rights Act 2015, which state that the work is to be completed within a reasonable time. However, once the job is under way it is unlikely that the parties will be able to agree on a definition of ‘reasonable time’.

Possession by the contractor

5.3 Possession of the site is a fundamental term of the contract. If the employer fails to give the contractor possession of the site on the agreed date this would be a breach of contract, which would give the contractor the right to claim an extension of time under clause 2.26.6 and direct loss and/or expense under clause 4.21.5. Any extended failure would be considered a serious breach by the employer, which might amount to repudiation, and therefore give the contractor the right to treat the contract as being at an end. Giving possession of part of the site only, or giving possession in stages, could amount to a breach unless this intention has been made clear in the contract documents (Whittal Builders v Chester-le-Street DC).

5.4 Possession of the site must be given in such a way that the contractor is not prevented from working in whatever way or sequence it chooses. With most jobs, this means that the contractor must be given clear possession of the whole site until practical completion. Clause 2.3 reinforces this by stating that ‘the Employer shall not be entitled to take possession of any part or parts of the Works’ until the date of issue of the practical completion statement. Where clear possession is not intended, then the tender documents should set out the restrictions in detail and the contract must be amended accordingly. This would include any employer restrictions relating to access to the site. Should the employer wish to use any part of the works for any purpose during the time that the contractor has possession, this should also be made clear in the tender documents, otherwise such use can only be with the agreement of the contractor (cl 2.5.1).

5.5 If clause 2.4 has been stated in the contract particulars to apply, then it is possible for the employer to defer possession without the agreement of the contractor. The clause allows for deferment for a period not exceeding six weeks, and the maximum period required must be stated in the tender documents and inserted into the contract particulars (cl 2.4). Any delay beyond the period stated in the contract particulars is a breach of contract. Although the contract does not specifically require it, the employer should give written notice of its intention to defer as far in advance of the commencement date as is practicable. If possession is deferred, the contractor may claim an extension of time (cl 2.26.3) and direct loss and/or expense (cl 4.19.1).

5.6 Under clause 3.10, the employer may issue instructions regarding postponement of any design or construction work. If work is postponed, the contractor may claim an extension of time (cl 2.26.2) and direct loss and/or expense (cl 4.21.2).

5.7 The parties are always free to renegotiate the terms of any contract. Therefore, if a delay in giving possession arises which is longer than the period stated in the contract particulars, the parties would have to agree a new date of possession, usually involving financial compensation for the contractor. Any further delay beyond the agreed date would, of course, be a breach.

Progress

5.8 It would normally be implied within a construction contract that a contractor will proceed ‘regularly and diligently’, and this is an express term in DB16 (cl 2.3). The contractor is required to commence work on being given possession of the site, to proceed regularly and diligently and to complete the works on or before the completion date. The contractor is free to organise its own working methods and sequences of operations, with the qualification that it must comply with statutory requirements and the construction phase plan. This has been held to be the case even where the contractor’s chosen sequencing may cause extra cost to the employer due to the operation of fluctuations provisions (GLC v Cleveland Bridge and Engineering).

5.9 There is no requirement under DB16 for the contractor to produce a programme. Of course, there is nothing to prevent such a requirement being included in the employer’s requirements, but it should be made clear that this will not be a contract document. If a programme is required, it is advisable to provide that the contractor submits it as part of the proposals, or at least before the contract is entered into. It is common practice to ask for a detailed programme indicating activities, a critical path and resources, and possibly key dates when information regarding the developing design will be supplied to the employer.

5.10 It is notoriously difficult to extract programmes from contractors once work has commenced. Sometimes the programme, when finally produced, can include an element of post-rationalisation to show that early events caused problems and delays. It is also advisable to ask for a critical path analysis, since it can otherwise be difficult to assess the effect of delays.

5.11 As the employer is not required to issue any further information, the programme does not fulfil the same role as under SBC16 in terms of identifying when such information may be needed. However, it will be an important tool in alerting the employer as to the latest date by which any final decisions should be made, or any changes could be made without causing delays.

Completion

5.12 The contractor is obliged to complete the works by the completion date. The most important reason for giving an exact completion date in a building contract is that it provides a fixed point from which damages may be payable in the event of non-completion. Generally, in construction contracts, the damages are ‘liquidated’, and typically are fixed at a rate per week of overrun. The contractor may finish the works earlier, and the employer would be obliged to accept the building, even if it were not convenient to do so.

5.13 The contractor, in general, accepts the risk of all events that might prevent completion by this date, except to the extent that the contract provides otherwise. The contractor would normally be relieved of this obligation if the employer caused delays or in some way prevented completion. In order to avoid situations arising where the contractor is no longer bound by the completion date, most contracts contain provisions allowing for the adjustment of the completion date in the event of certain delays caused by the employer.

5.14 In contracts it is sometimes essential that completion is achieved by a particular date and failure to meet that date would render the result worthless. This is sometimes referred to as ‘time is of the essence’. Breach of such a term would be considered a fundamental breach, and would give the employer the right to terminate the contract and treat all its own obligations as at an end. The expression ‘time is of the essence’ is seldom, if ever, applicable to building contracts such as DB16, as the inclusion of extensions of time and liquidated damages provisions imply that the parties intended otherwise.

5.15 In DB16 a ‘Date for Completion’ is inserted into the contract particulars (or where the sectional completion option is used, a separate date will be stated for each section). The contractor is obliged to complete by the ‘Completion Date’ (cl 2.3), which is defined as the ‘Date for Completion of the Works or of a Section … or such other date as is fixed either under clause 2.25 or by a Pre-agreed Adjustment’ (clause 2.25 contains the DB16 provisions for the granting of extensions of time). If the contractor fails to complete by the completion date, liquidated damages become payable (see Figure 5.1).

Figure 5.1 Completion and liquidated damages

Pre-agreed adjustment

5.16 There are two processes that can result in a ‘Pre-agreed Adjustment’ to the completion date (cl 2.23.2). The first process is where the employer operates the ‘Valuation of Change’ mechanism set out in paragraph 2 of the supplemental provisions. Under Schedule 2 paragraph 2.3, the contractor is required to estimate not only the addition to the contract sum (see paragraph 7.7), but also any extension of time appropriate for the proposed changes. If the employer and contractor can subsequently agree on an amount, then this is binding on the parties.

5.17 The second process is through the confirmed acceptance of an acceleration quotation (paragraph 4 of the Schedule 2 supplemental provisions). This provision allows the employer to investigate the possibility of achieving practical completion before the completion date. If invited by the employer, the contractor must provide, within 21 days, a quotation identifying the time that can be saved and the required increase in the contract sum, or explain why any acceleration is impracticable (paragraph 4.1.1). The employer must accept or reject the proposal within seven days, and a confirmed acceptance would be binding on the parties. If the employer does not accept the quotation, the contractor is paid a reasonable sum for the cost of its preparation (paragraph 4.4.1).

Extensions of time

Principle

5.18 As there is no independent contract administrator in DB16, it is important that the employer operates the extension of time provisions fairly, and understands the reason for their inclusion. They are not included as a let-out clause for the contractor, relieving it of the obligation to finish by the agreed date, and deleting these provisions would not benefit the employer; in fact, it would cause serious problems. If no such provisions were included, and a delay occurred that was caused by the employer, a court would consider that the contractor was no longer bound to complete by the completion date (Peak Construction v McKinney Foundations). The employer would therefore lose the right to liquidated damages, even though some of the blame for the delay might rest with the contractor. The extension of time provisions are therefore included to preserve the employer’s right to liquidated damages, in the event that the contractor fails to complete on time, due in part to some action for which the employer is responsible. The phrase ‘time at large’ is often used to describe this situation. However, this is, strictly speaking, a misuse of the phrase as in most cases the contractor would remain under an obligation to complete within a reasonable time.

5.19 DB16 therefore includes provisions for extending the time for completion where the employer has caused delays. It also allows for extensions of time in the case of certain neutral events, such as exceptionally adverse weather. In contrast to employer-caused delays, it would be possible to require the contractor to accept the risk of these neutral events, and consequently pay losses to the employer should it fail to adjust its programme to compensate for these risks. Taking on this risk would no doubt result in a higher tender figure. In some projects the employer may be prepared to accept this increase in price in exchange for greater certainty regarding completion. This would require careful amendment of the form, which should not be undertaken without legal advice.

Procedure

5.20 In DB16 the provisions for granting an extension of time (other than pre-agreed adjustments) are contained in clause 2.25. Where the sectional completion option is used, the provisions apply independently to each section. As noted above, it is particularly important that the employer takes great care to operate these provisions fairly, and neither delays the award of extensions, nor takes an overly conservative approach to their assessment. Any default by the employer is likely to result in the contractor asserting that it is no longer bound to finish by the completion date.

5.21 The contractor must give written notice ‘forthwith’ to the employer, when it appears that progress is being or is likely to be delayed (cl 2.24.1). The notice must be given whether or not completion is likely to be delayed, and irrespective of the cause (i.e. the requirement to give notice is not limited to circumstances where the contractor is claiming an extension of time). The use of the terms ‘forthwith’ and ‘is likely’ suggests that the notice should be given as soon as a potential problem becomes apparent, without waiting to see whether it results in a measurable delay (this requirement could be reinforced by the adoption of Supplemental Provision 10). It appears that, prior to practical completion, notification by the contractor is a condition precedent to the award of an extension of time; in other words, the employer may not grant an extension unless a valid notice has been given (although this is not the case in relation to extensions awarded after practical completion, see paragraph 5.28 below). The notice should set out the cause of the delay, and the contractor is required to establish whether or not the cause is a ‘Relevant Event’.

5.22 The contractor is also required to give particulars of the expected effects of all events identified as relevant events, and an estimate of the expected delay in the completion of the works or the section (cl 2.24.2). If it is not practical to supply this information with the notice, the contractor should identify the event as soon as possible. Following notification, the contractor must inform the employer of any change in the estimated delay or the particulars supplied (cl 2.24.3).

5.23 On receipt of the notice and particulars, the employer must assess the delay caused and make a decision regarding the appropriate extension of time, if any (cl 2.25.1). The decision must be notified to the contractor (even if the decision is that no extension is due) within 12 weeks of receipt of the notice and ‘the required particulars’ (cl 2.25.2). If the completion date is less than 12 weeks away, the employer shall endeavour to reach a decision prior to the completion date. Such decisions are specifically required before the provisions of Schedule 7 paragraph A.9 (the ‘freezing provisions’ in respect of fluctuations) can become operative.

5.24 The extension can only be given in relation to delay caused by events listed in clause 2.26. These events cover a very wide range of circumstances beyond the control of the contractor, including default by the employer and neutral events such as exceptionally adverse weather. With regard to relevant events (many of which are the same as those in SBC16) the following points should be noted:

• The contractor will be entitled to an extension if compliance with clause 3.15 (antiquities) is necessary.
• The contractor will be entitled to an extension following any exercise of its right of suspension arising from non-payment of amounts due by the employer (cl 2.26.5).
• The scope of clause 2.26.6 is very wide as it refers to ‘any impediment, prevention or default, whether by act or omission, by the Employer’. This will, to an extent, duplicate some of the other events and will therefore give alternative grounds for a claim.
• Statutory undertaker’s work (cl 2.26.7) covers only situations where work is carried out in pursuance of statutory duties. If the work is directly commissioned by the employer this comes under clause 2.26.6.
• Weather must be exceptional and adverse (i.e. not that which would be expected at the time of year in question) (cl 2.26.8). The effect of the weather is assessed at the time the work is actually carried out, not when scheduled in the contractor’s programme.
• Specified perils (cl 2.26.9) can, under certain circumstances, include events caused by the contractor’s own negligence.
• Clause 2.26.11 also includes strikes, etc., affecting those engaged in preparation of the design of the works. (Note that the general protection afforded with respect to strikes is very wide, i.e. not simply those directly affecting the works, but also those causing difficulties in preparation and transportation of goods and materials. Such strikes will not necessarily be confined to the UK and, given the current extent of overseas imports, the effects could be considerable.)
• The exercise of a statutory power by the UK Government or a local or public authority is a relevant event, provided this was not necessitated by a breach of the contractor (cl 2.26.12).
• Delay in receipt of planning or other necessary permissions or approvals of statutory bodies is a relevant event, provided that the contractor has taken all practicable steps to avoid the delay (cl 2.26.13).
• There is no ground for claiming for delay caused by a named sub-contractor.
• There is no ground for claiming due to shortage of or difficulty in obtaining labour, goods or materials.

5.25 Failure to grant an extension properly due could result in the contractor no longer being obliged to finish by the completion date (although this is unlikely to be the case if the contractor has failed to comply with the procedural requirements relating to applications, Multiplex v Honeywell). The employer should nevertheless take care to deal with the matter within the stipulated time limits. Clause 2.25.3 requires the employer to identify in any extension the relevant events which have been taken into account, and whether any account has been taken of work which has been omitted. The employer must also notify the contractor if it is decided that no extension of time is due.

5.26 Following the first extension of time, under clause 2.25.4 the employer may fix an earlier completion date than that previously fixed, where there is a change which results in the omission of any work or obligation or restriction, and the employer may do so without having received any notice from the contractor. However, clause 2.25.6.3 makes it clear that the employer may not fix a date earlier than the original date for completion.

5.27 The employer may award further extensions of time in respect of relevant events which occur after the completion date but before practical completion, i.e. when the contractor is in ‘culpable delay’ (Balfour Beatty v Chestermont Properties). In this event, the extension is added onto the date that has passed, referred to as the ‘net’ method of extension. The employer may also bring forward the completion date, where appropriate, due to work being omitted.

5.28 Following practical completion of the works, or of a section, the employer may grant a further extension of time at any point up to 12 weeks after practical completion (cl 2.25.5) and may review any extension of time previously given. The final review may extend the date previously fixed and may bring it forward where work is omitted, but not to a date earlier than the date for completion entered in the contract particulars. At this point there is no requirement for notification by the contractor, although it is likely that the review will be the subject of some correspondence between the parties. The employer must notify the contractor of the result of the review by the end of the 12-week period, including if the decision is that no further extension is due.

Assessment

5.29 The contractor is entitled to extensions of time properly due under the contract and any failure on the part of the employer to comply with the provisions would constitute a breach of contract. However, the employer has no power to grant extensions of time except as provided for in the contract, and for delays caused by events listed in clause 2.26.

5.30 The employer should make an objective assessment of every notice received. The aim is to establish whether a delay has been caused by the event cited, whether the delay is likely to disrupt the programme and, consequently, delay the final completion date and, if so, to assess the probable extent of that final delay. Any contractor’s programme can be used as a guide and may be particularly useful where the programme shows a critical path, but although it may be persuasive evidence it is not conclusive or binding. The effect on progress is assessed in relation to the work being carried out at the time of the delaying event, rather than the work that was programmed to be carried out.

5.31 Clause 2.25.6.1 contains the important proviso that the contractor must ‘constantly use his best endeavours to prevent delay’; therefore, the employer can assume that the contractor will take steps to minimise the effect of the delay on the completion date, for example by reprogramming the remaining work. The phrase ‘best endeavours’ requires something more than ‘reasonable’ or ‘practicable’, but it is unlikely to extend to excessive expenditure. Clause 2.25.6.2 states that the contractor ‘shall do all that may reasonably be required to the satisfaction of the Employer to proceed with the Works’. However, if the employer requires measures to be taken which amount to a change in the employer’s requirements, then this may result in a claim for loss and/or expense.

5.32 The effect on completion of any delay, taking into account the contractor’s ‘best endeavours’ (cl 2.25.6.1), is not always easy to predict. The employer is required to form a view on the delay, and in doing this the employer would be wise to take an objective view, even where the delay has been caused by the employer. If the contractor believes that the employer has not awarded a sufficient extension, it could raise this dispute in adjudication and if the contractor is proved correct the employer will not only be obliged to grant the extension, but will also be liable for losses to the contractor.

5.33 Two or more delaying events may happen simultaneously, or with some overlap, and this can raise difficult questions with respect to the award of an extension of time. In the case of concurrent delays involving two or more relevant events, it has been customary to grant the extension in respect of the dominant reason, but this is only appropriate where the dominant reason begins before and ends after any other reasons. Even then, if the dominant reason is not a ground for a loss and expense claim, this may still be awarded in respect of the other delaying events (H Fairweather & Co. v Wandsworth).

5.34 Where one overlapping delaying event is a relevant event and the other is not (in other words, one is the employer’s risk and the other the contractor’s), a difficult question arises as to the extension of time due. The instinctive reaction of many assessors might be to ‘split the difference’, given that both parties have contributed to the delay. However the more logical approach is that the contractor should be given an extension of time for the full length of delay caused by the relevant event, irrespective of the fact that, during the overlap, the contractor was also causing delay. Taking any other approach, for example splitting the overlap period and awarding only half of the extension to the contractor, could result in the contractor being subject to liquidated damages for a delay partly caused by the employer. The courts have normally adopted this analysis (see Walter Lilly & Co. Ltd v Giles Mackay & DMW Ltd). A leading Scottish case had stated that a proportional approach would be fairer (City Inn Ltd v Shepherd Construction Ltd), but this decision is not binding on English courts and was not approved in Walter Lilly.

Partial possession

5.35 The employer may take possession of completed parts of the works ahead of practical completion by the operation of clause 2.30. ‘Partial possession’ requires the agreement of the contractor, which cannot be unreasonably withheld. The contractor must issue a written statement to the employer identifying precisely the extent of the ‘Relevant Part’ and the date of possession (the ‘Relevant Date’). This statement should be prepared with great care, if necessary using a drawing to illustrate the extent, and the employer should check the statement carefully. The insurers should be notified where relevant. The statement must be issued immediately after the part is taken into possession but, in practice, it would be wise to circulate the drawings and information in advance, so that the details of what will occur are clear to all parties. The partial possession may affect other operations on site, in which case it could constitute an ‘impediment’. The employer should therefore consider the possible contractual consequences in terms of delay and claims for loss and/or expense.

5.36 Clause 2.31 states that practical completion is ‘deemed to have occurred’ for the ‘Relevant Part’ of the works, and that the rectification period for that part is deemed to commence on the ‘Relevant Date’. The employer is required to issue a separate notice when defects have been made good (cl 2.32). However, the relevant part remains part of the works, and is still to be included under the statement of practical completion. It is notable that the clause does not state that the works to the ‘Relevant Part’ must have reached practical completion but, in view of the contractual consequences, it would be unwise for the employer to take possession before practical completion has been achieved (see paragraph 5.45 below).

5.37 Liquidated damages are reduced by the proportion of the value of the possessed part of the works to the contract sum (cl 2.34). The effect of clause 4.18.2 is that half of the retention is released for that proportion of the works. If Insurance Option A, B or C.2 applies, the obligation to insure ceases (cl 2.33), and the employer may wish to consider insuring that part, as the contractor’s obligation to insure the works will cease.

5.38 It is important to note that the fact that significant work remains outstanding has not prevented the courts from finding that ‘partial possession’ has been taken of the whole works, in situations where a tenant has effectively occupied the whole building, allowing access to the contractor for remedial work (see Skanska Construction (Regions) Ltd v Anglo-Amsterdam Corporation Ltd). If the parties do not intend clause 2.25 to take effect for the whole project, they must make clear, under a carefully worded agreement, what are the contractual consequences of any intended occupation (see below).

Use or occupation before practical completion

5.39 Clause 2.5 provides for the situation where the employer wishes to ‘use or occupy the site or the Works or part of them’ while the contractor is still in possession. The purposes for which the employer might require such use are described simply as ‘storage or otherwise’ and, while this might suggest that the intention is of a limited role, in theory at least the clause places no limits on what form such use or occupation might take. In practice, as the written consent of the contractor is required and (as with partial possession discussed above) it appears neither to be included as an event for which an extension of time may be awarded, nor as a matter for which losses for disturbance can be claimed, it would not be unreasonable for the contractor to withhold permission unless it could be established that the use or occupation would cause no delays. Before the contractor is required to give consent, the employer or the contractor (as appropriate) must notify the insurers. Any additional premium required is added to the contract sum (cl 2.5.2).

5.40 Situations can arise where the contractor has failed to meet the completion date and, although no sections of the works are sufficiently complete to allow the employer to take possession of those parts under clause 2.27, the employer is, nevertheless, anxious to occupy at least part of the works. Nothing in the contract specifically allows for this situation. A suggestion was put forward in the ‘Practice’ section of the RIBA Journal (February 1992), which has frequently proved useful in practice (see Figure 5.2): in return for being allowed to occupy the premises, the employer agrees not to claim liquidated damages during the period of occupation. A statement of practical completion obviously cannot be issued, and retention money cannot be released until it is. The insurance of the works will need to be settled with the insurers.

Figure 5.2 ‘Practice’ section, RIBA Journal (February 1992)

5.41 Such an arrangement would be outside the terms of the contract. It should, therefore, be covered by a properly drafted agreement which is signed by both parties. (The cases of Skanska v Anglo-Amsterdam Corporation above and Impresa Castelli v Cola illustrate the importance of drafting a clear agreement.) It may also be advisable to agree that, in the event of the contractor’s failure to achieve practical completion by the end of a further agreed period, liquidated damages would begin to run again, possibly at a reduced rate. In most circumstances, this arrangement would be of benefit to both parties, and is certainly preferable to issuing a heavily qualified statement of practical completion listing ‘except for’ items.

Practical completion

5.42 The employer is obliged to issue the contractor with a written statement (cl 2.27) when:

• the works (or a section) have reached practical completion (see below); and
• the contractor has ‘complied sufficiently with clauses 2.37 and 3.16 in respect of the supply of documents and information’ (i.e. as-built drawings and information required for the health and safety file).

5.43 Clause 2.27 then states that ‘practical completion of the Works or the Section shall be deemed for all the purposes of this Contract to have taken place on the date stated in that statement’. Although the wording of clause 2.27 is somewhat circular, a reasonable interpretation of this clause is that practical completion only occurs when both conditions are met, the principal argument for this reasoning being that only one date is named in the statement. The employer would be entitled to withhold the statement until all significant as-built and health and safety information has been received, even if the actual works have been finished for some time, and would certainly be entitled to do so if the lack of information put the employer at risk of being in breach of the CDM Regulations. The use of the term ‘complied sufficiently’ (cl 2.27) may allow the employer to use its discretion in issuing the statement despite some information being missing.

5.44 Deciding when the works have reached practical completion often causes some difficulty. It is suggested that practical completion means the completion of all works required under the contract and by subsequent instruction. Although it has been held that an architect has discretion under JCT traditional forms to certify practical completion where there are very minor items of work left incomplete, on de minimis principles (City of Westminster v Jarvis and H W Nevill (Sunblest) v William Press; Hall v Van Der Heiden), the employer would be wise to proceed with caution. Contrary to the opinion of many contractors, there is no obligation to issue the statement when the project is ‘substantially’ complete (or even when it is capable of occupation by the employer) if items are still outstanding.

5.45 An early statement of practical completion should be treated with extreme caution as it can give rise to considerable complications. Even though the employer may be keen to move into the newly completed works, and the contractor, anxious to avoid liquidated damages, may be even more enthusiastic, the temptation to issue the statement early should be avoided. The employer may later find itself in a difficult position contractually as the following areas of potential contractual difficulty come into play:

• half of the retention will be released, leaving only half in hand (cl 4.18.2). This puts the employer at considerable risk, as the 1.5 per cent remaining is only intended to cover latent defects;
• the rectification period begins (cl 2.35);
• the onus shifts to the employer to notify the contractor of all necessary outstanding work under clause 2.35. If the employer should fail to include any item the contractor would have no authority to enter the site to complete it – therefore the employer will inevitably become involved in managing and programming the outstanding work;
• possession of the site passes to the employer and, depending on the insurance arrangements, the contractor might no longer cover the insurance of the works. The insurers will need to be informed about the programme for the outstanding works;
• the contractor’s liability for liquidated damages ends;
• the employer will be the ‘occupier’ for the purposes of the Occupiers’ Liability Acts 1957 and 1984 and may also be subject to health and safety claims.

5.46 The statement must be issued as soon as the criteria in clause 2.27 are met. The contractor is obliged to complete ‘on or before’ the completion date and once practical completion is achieved the employer is obliged to accept the works. Employers who wish to accept the works only on the date given in the contract will need to amend the wording. If the sectional completion modifications are used, a statement of practical completion must be issued for each section of the works.

Procedure at practical completion

5.47 The contract sets out no procedural requirements for what must happen at practical completion, it simply requires the employer to issue a statement. It would be advisable for the employer’s requirements to set out a procedure, particularly in relation to provisions for testing and commissioning and the satisfaction of performance requirements.

5.48 Leading up to practical completion, it is advisable for the employer (and any employer’s agent) not to become too deeply involved with events on site. It sometimes happens that the employer’s agent feels obliged to issue detailed ‘snagging’ lists of defective and outstanding work. Under the contract, responsibility for quality control and snagging rests entirely with the contractor. In adopting this role the employer may be assisting the contractor, and although this may appear to be of immediate benefit in alerting the contractor to problems, it may lead to confusion over the liability position, which might give rise to future difficulties. If the employer feels that the works are not complete, but the contractor is disputing this fact, the best course may be to draw attention to typical problems, but to make it clear that the list is indicative and not comprehensive.

5.49 It is common practice for the contractor to arrange a ‘handover’ meeting. The term is not used in DB16, although handover meetings can be particularly useful in design and build, where the employer will rely more heavily on the contractor to explain the operation and maintenance of the building than might be the case with traditional procurement. Nevertheless, such a meeting, regardless of its practical value, would be of no contractual significance.

Failure to complete by the completion date

5.50 In the event of failure to complete the works by the completion date, the employer is required to notify the contractor of the failure (a ‘Non-Completion Notice’, cl 2.28) and the notification is a condition precedent to the deduction of liquidated damages (cl 2.29.1.1).

5.51 If the sectional completion provisions are used, a separate notice will be needed for each incomplete section. Once the notice has been issued, the contractor is said to be in ‘culpable delay’. The employer, provided that it has issued the necessary notices (see paragraph 5.55 below), may then deduct the damages from the next interim payment, or reclaim the sum as a debt. Note that fluctuations provisions are frozen from this point. If a new completion date is set at a later date, this has the effect of cancelling the notice and the employer must issue a further non-completion notice, if necessary.

Liquidated and ascertained damages

5.52 The agreed rate for liquidated and ascertained damages is entered into the contract particulars. This is normally expressed as a specific sum per week (or other unit) of delay, to be allowed by the contractor in the event of failure to complete by the completion date (note that several different rates may apply where the works are divided into sections). As a result of two decisions in the Supreme Court, it is no longer considered essential that the amount is calculated on the basis of a genuine pre-estimate of the loss likely to be suffered (Cavendish Square Holdings v El Makdessi and ParkingEye Limited v Beavis; see also Alfred McAlpine Capital Projects v Tilebox). Provided that the amount is not ‘out of all proportion’ to the likely losses, the damages will be recoverable without the need to prove the actual loss suffered, irrespective of whether the actual loss is significantly less or more than the recoverable sum (BFI Group of Companies v DCB Integration Systems). In other words, once the rate has been agreed, both parties are bound by it. Of course, for practical reasons, the rate should always be discussed with the employer before inclusion in the tender documents, and an amount that will provide adequate compensation included to cover, among other things, any additional professional fees that may be charged during this period. If ‘nil’ is inserted into the contract particulars then this may preclude the employer from claiming any damages at all (Temloc v Errill), whereas if no sum is entered the employer may be able to claim general damages.

5.53 Before liquidated damages may be claimed, the following preconditions must be met:

1. the contractor must have failed to complete the works by the completion date;
2. the employer must have fulfilled all duties with respect to the award of an extension of time;
3. the employer must have issued a non-completion notice to the contractor (cl 2.29.1.1);
4. the employer must have notified the contractor before the due date for the final payment under clause 4.24.5 that it may require payment of, or withhold, liquidated damages (cl 2.29.1.2).

5.54 If these preconditions are met then the employer may, not later than five days before the final date for payment of ‘the amount payable under clause 4.24, issue a notice in accordance with clause 2.29.2 (cl 2.29.1). It should be noted that, although clause 2.29.1 states the employer ‘may’ give this notice, in effect the notice must be issued if the employer wishes to claim liquidated damages.

5.55 Clause 2.29.1 therefore requires two types of notice: first, a general notice of intention (cl 2.29.1.2) and then a notice not later than five days before the final payment date for the final payment (cl 2.29.1). This second notice requires more detail than the first; it must state that ‘for the period between the Completion Date and the date of practical completion’ the employer requires the contractor to pay the sum to the employer and/or intends to deduct liquidated damages from monies due, and whether the rate will be the contractual one or a lesser sum (cl 2.29.2). The requirement and notification must be reasonably clear, but there is no need for a great deal of detail (Finnegan v Community Housing Association). It may be possible for the clause 2.29.1.2 requirement and the clause 2.29.1 notice to be dealt with together, provided the document contains the necessary information and is issued at the right time. However, it is important to note that if the employer wishes to withhold or deduct all or any of the liquidated damages payable, footnote [37] to clause 2.29.2.2 explains that, in addition to the notice under clause 2.29.1, the employer must give the appropriate ‘Pay Less Notice’ under clause 4.9 (see paragraph 8.30 of this Guide). This will explain the calculation for that particular deduction, i.e. the period over which the damages are claimed, and the rate applied.

5.56 The employer is entitled to deduct liquidated damages for the period between the completion date and the date of practical completion (cl 2.29.2). Use of the phrase ‘fails to complete the Works’ in clause 2.28 is unfortunate as this is only one of the criteria that has to be met before the employer issues the notice of practical completion (see paragraph 5.43), and the phrase creates certain ambiguity regarding liquidated damages. For example, a contractor might try to argue on the basis of this wording that, once it has completed the works, the employer loses the right to deduct further liquidated damages, even though the employer has not yet issued the practical completion statement. It is suggested that clause 2.28 would be much clearer if it were to read: ‘If practical completion has not been achieved by the Completion Date’. Nevertheless, given the clear intention behind the clause, it is to be hoped that no such argument as that set out above would succeed.

5.57 If an extension of time is given following the issue of a notice of non-completion, then this has the effect of cancelling that notice. A new non-completion notice must be issued by the employer if the contractor then fails to complete by the revised completion date (cl 2.28). The employer must, if necessary, repay any liquidated damages recovered for the period up to the new completion date (cl 2.29.3) and must do so within a reasonable period of time (Reinwood v L Brown & Sons). Clause 2.29.4 states that any notice which has previously been issued in accordance with clause 2.29.1.2 shall remain effective ‘unless the Employer states otherwise in writing’, notwithstanding that a further extension of time has been granted.

5.58 In Department of Environment for Northern Ireland v Farrans, it was decided that the contractor has the right to interest on any repaid liquidated damages. This decision was criticised at the time¹ and would be unlikely to be applied in relation to DB16, where the wording is now different, but the right to interest nevertheless remains an open question.