What Is Substantial Compliance And Why Should You Care?
The words “almost,” “pretty close” or “close enough” aren’t generally positive things when talking about normal activities. You wouldn’t think they would be acceptable things in the world of construction law either. But believe it or not, there is a “good enough” defense when it comes to contractual claims, and the words are often used in the construction law world.
The legal term for “good enough” is called substantial completion.
Substantial completion happens when someone fails to fully perform a contract, but comes “close enough.” So close, in fact, that it would be unfair to declare that party in breach of a contract, or to deny the party payment under the contract.
What the owner receives when the project is complete is so close to what was bargained for, and caused such minimal “damage,” that it isn’t even worth holding the other side in breach, or declaring the other side (the builder) to make corrections.
To see whether an error or failure to complete work under a contract constitutes substantial completion, a court will look to see whether the owner can use the property for the purpose intended. This is also the definition used by the American Institute of Architects.
However, contractors and builders should not rely on receiving a certificate of occupancy. Receiving one is a governmental decision, and does not automatically mean that there has been substantial completion for construction law purposes.
Don’t Walk Away
Substantial completion is not an excuse to cut corners, or get paid by doing less work. Purposeful noncompletion, or failure to abide by a contract, will defeat a defense of substantial completion. Just walking away from a project (called abandonment) will also not allow someone to claim substantial compliance.
General contractors do have an obligation to ensure that subcontractors are fulfilling their duties, and a failure to supervise subcontractors will bar a contractor from claiming substantial compliance.
Why is the Date of Completion Important?
As you probably can imagine, there can be disputes between an owner and a builder over when substantial completion occurs. You can always opt to specify in your agreements, when substantial completion occurs.
Another benefit of knowing the substantial completion date is that after that date, the builder or contractor is then off the hook for different kinds of damages, or financial obligations. These can include obligations to pay utilities, but also can include absolving the builder of liability for delays in construction.
The substantial completion date also plays a role in calculating the deadline for things like payments to subcontractors, deadlines to file any liens, and calculation of the length of guarantees and warranties. It also can be crucial in determining damages, in the event that payment is not timely made to the builder.
Call our Fort Lauderdale construction attorneys at Sweeney Law P.A. at 954 440-3993 for help today with your construction law contracts.