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Legal Notes: The importance of the contracted completion date

John Bleasby
Legal Notes: The importance of the contracted completion date

When it comes to a project agreement between parties, no date is more important than the contracted completion date. Any delay impacts from change orders, design errors, environmental factors or other unforeseen circumstances are measured from that originally contracted date.

The importance of the original completion date must be understood right from the outset during bidding, says Sahil Shoor, partner with Gowling WLG. This requires a proper review of the tender documents supplied by the owner. At that time, bidders on the project have the opportunity to ask questions to better understand the design and the owner’s proposed completion date. When tendering, the bidder might suggest an alternate completion date by saying, “This is the date we have in mind in order for completion to take place.”

“After owners go through the whole competitive bidding process and choose a contractor, parties then work together on the schedule which then becomes the backbone for the project to be completed on time,” Shoor told the Daily Commercial News.

However, things can, and probably will, occur while construction is underway that can affect the critical paths that lead to the original completion date.

Every project has critical paths.

“These are activities that are so critical in order to attain the completion date, that if items fall off that critical path, there will be an impact on the completion of the project,” explains Shoor.

When that happens, a delay analysis must be undertaken, says Shoor. The originally contracted completion date will be the benchmark for that analysis.

Yet nothing needs to be carved in stone.

“The original contracted completion date can be amended as long as there is certainty and agreement between the parties,” explains Shoor.  “You don’t go back and do a whole new agreement each time, because as the project is getting completed and construction is ongoing, there will likely be several changes.”

For example, it’s critical that all parties are aware of change orders and any impact they may have. Once a change order is issued and all parties have signed off, everyone must understand whether that change will add days to or subtract days from the completion date. Failure to pay attention to the ripple effects on the original schedule can lead to disputes later.

This places extreme importance on the original contract as the base document, and why it must be drafted with such care, precision and understanding.

That care, precision and understanding extend to other dates and terms related to the completion date, such as certificates of completion and acceptance of work completed with either full or partial occupancy. Other contractual rights, such as maintenance and payment holdbacks, and various guarantees, can also be triggered based on the originally agreed completion date.

Should disagreements occur, resolution options are limited and complex.

Shoor reminds that prompt payment adjudication processes available in various provinces don’t apply in these types of disputes.

“Prompt payment works on an invoice-by-invoice basis. Adjudication is only available before the project is completed. You cannot adjudicate after the project is completed.”

In other words, disputes involving delays to a project already completed must be resolved using traditional resolution processes.

Neither can contractors or owners turn to insurance for financial relief. Insurance can only be called upon in the event of default under the contract, damage to property or negligence, says Shoor. In the case of default, a notice of default must be delivered, offering a time frame for the contractor to rectify the default.

The alternate resolution is the performance bond posted by the contractor. In that case, a notice terminating the contractor’s right to work under the contract is issued. The same notice is also issued to the bonding company claiming that the contractor has not performed.

With so much riding on the original completion date, close attention when the contract is negotiated and drafted, and the way the terms are defined, are required in order to overcome any ambiguity and potential for disagreements between the parties.

John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.

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