Substantial completion is a term used in construction contracts to signify when the project is nearly complete. It’s often utilized to trigger the final phase of many projects, including setting up final payments and finalizing the work to be finished. In this article, a construction lien lawyer from Brentwood, TN, discusses what constitutes substantial completion in construction contracts.
What Is Substantial Completion?
A construction project, no matter how large or small, is completed only when all of its major components have been constructed and successfully tested and the “mechanical” components’ functional elements are properly wired and connected to form the construction itself. Although some construction projects may have additional steps not directly related to the construction itself, such as furnaces, ductwork, water heaters, etc., these components are not part of the construction process and are therefore not considered “substantial” by any definition of this term.
Related: Substantial Completion: What Is It?
Triggers Right to Payment
As previously discussed, substantial completion is a significant project milestone and triggers payment from the obligated party, including full and complete payment of all costs and expenses incurred during the construction phase. Although the ultimate responsibility of any obligated party in connection with a construction contract is to meet all of its obligations under the contract, there are times when the obligated party is not able to perform under the contract for one reason or another and, for such reason, the obligated party must pay for additional work beyond what was contracted. Fortunately, payment can still take place as long as there is substantial completion, even with some other steps left to do.
Because of this principle, both parties in a contract have the interest to ensure full and prompt completion of the project by agreeing to a contract that includes the right to payment. There are many instances when this is best achieved by establishing a system by which payments are calculated, either on an installment basis or on a timely basis. It also allows the industry to avoid delays in construction projects by ensuring that payments are received on time and encourage responsible contracting practices among all parties that engage in these types of transactions.
Understanding what substantial completion is can make a substantial difference in your construction projects. It is an important legal distinction, which is why you should partner with a lawyer to plan and review your contracts. If you have questions about construction contracts, contact one of the construction dispute lawyers in Brentwood, TN, from Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.