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Form that now means more than just an end to construction

The final certificate is, you might think, a straightforward document. It is, after all, the one that both parties to a JCT standard form of building contract have usually been waiting for longer than they would have thought possible.

For contractors it means an end to all those tedious arguments about the valuation of variations, liquidated damages and loss and expense.

The final account has finally been agreed and, with any luck, the last tranche of money is coming their way.

For employers it means that the whole grisly construction process is finally over, the building is theirs and they can get on with their lives. (I am speaking from experience here. Although practical completion was certified for the works to our weekend cottage in May last year, we are still waiting for the final certificate - not because anyone has been slacking, you understand, but because 'these things take time'. ) Since the appeal court judges got themselves caught up in the intricacies of the JCT standard form in Crown Estates v Mowlem (1994), however, the final certificate has taken on a significance far greater than its determination of the bottom line.

In that case, to the surprise of commentators and the industry alike, the Court of Appeal held that a final certificate not only certifies the final balance, it also certifies the architect's satisfaction with the standard of materials and workmanship. This means that contractors who have the benefit of a final certificate have a complete defence to subsequent defects claims. In turn, this leaves the owner of a defective building with no other remedy than to sue the architect for having issued the certificate in the first place.

Reactions to the decision were varied.

Lawyers recommended amending the standard form to prevent the certificate from having the stated effect. Legal commentators lamented the involvement of appellate judges in matters about which they clearly knew nothing. Ian Duncan Wallace, for example, produced a vitriolic article under the headline 'Loose cannons in the Court of Appeal'. Many architects, it seems, just stopped issuing final certificates.

No final certificate was issued in the contract for local authority housing that gave rise to the recent case of Tameside Metropolitan Borough Council v Barlow Securities Group Services Limited (2001). When defects appeared in the houses ten years after construction, the council must have been relieved to discover that it was not barred from proceeding against the contractors by a misplaced final certificate. Relief turned to dismay, however, when the contractor argued that a final certificate ought to have been issued and that it was protected from the claim just as if it had.

It turned out that the parties had agreed in 1988 that they would not go through the final account process because the contractor was owed only a small sum and it would be uneconomic to prepare a final account. Instead, they agreed to a final account balance of 'nil', which obviated the need for a final certificate. Subsequently, the contractor argued that the council had also agreed to forgo its right to argue 'no final certificate' should the works prove defective.

The Court of Appeal made short work of this argument. The judges said there was nothing to show that the parties had made such a far-reaching and, let's face it, rather unlikely agreement. Even if the council had said something to the effect that it would act as if a final certificate had been issued, the contractor could not show that it then appreciated the significance of the final certificate and the effect of the agreement.

If you think about it, how could it? In 1988, no one knew that six years later the appeal court would tell a rather startled construction industry that the final certificate meant much more than everyone thought it did. Furthermore, the architect was exonerated for failing to issue the final certificate because the contractor had never presented its final account and supporting documentation. Instead, all concerned had done nothing once the works were complete and, as the court pointed out, doing nothing does not amount to an agreement and is always equivocal.

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