Construction Contracts and the Final Account

Construction contracts and construction law can be a minefield. However final accounts (including for the purposes of this article final certificates) draw a line of sorts under the contractual obligations owed by the parties to a contract to each other. As always the answer depends on what the sub contract actually says. However, frequently under standard forms, and particularly JCT forms, final accounts also finalise (subject to formal proceedings) disputes under the contract – normally those arising from valuations, quality of work and decisions on extensions of time and loss and/or expense. That is why clauses dealing with final accounts often impose on the parties’ conclusivity unless objection is made within a prescribed period. If you do not dispute the areas you disagree with it may well be too late to argue these points. Disputing elements of the final account means in effect either adjudication or arbitration.

It is precisely because of the possible severe effect of the conclusivity of such final accounts that sub contractors (and contractors) must be alert to their issue. If they do not agree with the account they must ensure that they make the necessary moves under the relevant clause to dispute the account or at least those parts with which they disagree – or they may find the account is binding.

However there are certain steps that are a condition precedent to the issue of a valid final account. If it is not valid then it cannot be conclusive. There are two important areas:

Firstly, It will be rare these days for a contract to be completed and for there to be no defects notified in accordance with the contract. Where defects are so notified under the main contract then a certificate of making good defects has to be issued. The courts have held in such circumstances that until the certificate of making good defects has been issued there can be no final certificate. Generally the same will be true of sub contracts.

Secondly, where the contract has been delayed the courts have been very clear about the extension of time issue. Here they have said that where practical completion occurs after the contractual completion date two things must occur before the final certificate can be issued (or at least become conclusive) – (i) there must be a certificate of non-completion and (ii) the architect must have carried out and completed the contractual mechanism of fixing or confirming the revised date.

However best advice always is this: if you do receive a final account/certificate you should always deal with it as a matter of urgency or it may become binding. If in doubt – take advice.