Practical Law

A subscriber recently asked whether a contractor under a JCT contract can claim an extension of time after the contract administrator has issued a certificate of practical completion.

The subscriber’s question related to the JCT Minor Works Building Contract, 2005 edition, Revision 2 2009 (the JCT contract), but the issues raised apply more widely to the JCT suite of contracts.

What the contract says

At first sight it might seem strange that an extension of time can be claimed after practical completion, but what is the contractual position? Looking at the JCT contract itself (assuming it contains no bespoke amendments):

• There is no express bar in the contract on claiming an extension of time after practical completion and it is difficult to find any implicit bar. The closest provision is clause 2.7, which states that, if the it becomes apparent that delay will occur, “the Contractor shall thereupon notify the… Contract Administrator.” This may be an immediate requirement, but the contract provides no consequence for failure to notify immediately and it seems unlikely that a court would interpret clause 2.7 as a condition precedent to claiming relief. This is particularly apparent if one contrasts the JCT suite with other forms of contract, such as the NEC3 forms, which include unequivocal time bars to claiming relief.
• Clause 2.8 of the contract permits the Employer to claim liquidated damages (LDs) at any time until the final certificate is issued. (In fact, the JCT’s guidance notes to the contract (paragraph 31) indicate that LDs are not taken into account by the contract administrator in calculating any certificate. It is up to the employer to deduct them from an amount certified.) It is difficult to see why the contract would allow the employer to claim LDs after practical completion without giving the contractor a reciprocal right to claim an extension of time.
• Clause 2.9 deals with practical completion, but does not state that a certificate of practical completion is conclusive. In fact, the certificate of practical completion itself is unlikely to go further than stating the date on which completion occurred. The certificate is unlikely to expressly apportion any liability for delay in reaching completion or set out any payments due. This means that, even if the certificate is conclusive, it will not deal with anything apart from the date on which practical completion occurred.
• Clause 4.4 provides for interim certificates to be issued after practical completion, so there is an ongoing mechanism for adjusting amounts payable. Clause 4.8 deals with the final certificate. Unlike other forms of contract, there is no express wording that making even the final certificate conclusive, but equally there is no provision for either party to claim payment after the final certificate. The final certificate is clearly intended as the “final word” (subject to any dispute). Overall, the interim and final certificate provisions indicate a contract mechanism where issues such as extensions of time and liquidated damages may remain “live” for some time after practical completion.

Reasons for the JCT approach

On a more philosophical level, there are good reasons why the JCT allows a contractor to claim an extension of time after practical completion, and these become clear if one considers the dispute resolution mechanism. In the event of a dispute, both an adjudicator (under the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649)) and an arbitrator (under Schedule 1 of the contract) have the power to open up and revise any certificate issued under the JCT contract. This is because the detailed reasons for problems on a project often become apparent only after practical completion, so it is relatively common for disputes to arise after completion. An adjudicator or arbitrator is unlikely to have any conceptual difficulty dealing with a dispute in that situation.

What are the alternatives?

If the parties disagree with the JCT’s philosophy and want to limit the possibility of claims after practical completion, they can consider bespoke amendments to the contract. Alternatively, they may decide to use a different form of contract, such as the NEC3 Engineering and Construction Contract… but whether that is preferable is a much-debated question.