Early certification

Sometimes an employer will be keen for a contract administrator to certify completion while there are still patent defects or substantially incomplete works. This may occur where, for example, the employer has widely advertised a commencement of trading date or where the employer is committed to bringing the relevant infrastructure back into operation. The consequences of this course of action are widely misunderstood by both contractors, consultants and employers.

Contractors often believe that the certificate of completion marks an end to their liability for delay related damages, and should therefore be welcomed at the earliest possible opportunity. This is correct for liquidated damages, but it does expose the contractor to unliquidated damages for breach of contract in respect of the defects after completion. As unliquidated damages are sometimes significantly higher than liquidated damages, a contractor who does not object to the issue of the certificate of completion while there are still substantial works to be undertaken may still find itself exposed to a surprisingly high liability for unliquidated delay related damages.

Employers often believe that the certificate of completion marks the end of any potential liability that they may have to the contractor for delay damages. This is not correct. If the employer's earlier actions have delayed the works, the early issue of the certificate of completion will not reduce any liability for delay damages - indeed, it may increase such liability if the contractor is forced to complete the works out of normal working hours or under other restrictions while the employer is in occupation.

In addition, the issuing of the certificate of completion before actual completion of the works will remove any firm date that may otherwise have applied to completion of the remaining works. The contractor's obligation with regard to these remaining works will be to complete them within a reasonable time.

If there are genuine commercial reasons for the employer to take possession and occupation of the works before the works are complete, it may be beneficial for both sides to agree the conditions for such occupation and the conditions under which the remaining works are to be completed, a timetable for completion of the works, and the consequences of the outstanding works being completed late. Such agreements should be signed off by lawyers before they are relied upon.