FAQ's Principal Building Agreement

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Clause 33
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Question 1

I am the principal agent in a project where the contractor’s failure to complete the works has delayed the issue of the certificate of final completion. The employer is owed money by the contractor which he can recover in the final payment certificate although this cannot be issued until the issue of the certificate of final completion. Can I issue a qualified certificate of final completion containing reference to the incomplete items in order to allow me to issue the final payment certificate and, if not, what remedies are available to the employer?

Ref: P33.001

Answer

A certificate of final completion constitutes conclusive evidence as to the sufficiency of the works and the fulfillment of the contractor’s obligations other than for latent defects [26.6] and therefore may not contain any qualifications.

The fact that the contractor has failed to complete the works means that he has not completed the items on the defects list and therefore has failed to carry out a contract instruction [17.1.18]. Consequently the employer may now proceed in terms of 17.4 and employ other parties to carry out such contract instruction subject to his right to recover any resultant expense or loss. Once this has been done the certificate of final completion is to be issued. The employer may then recover such expense and loss via the recovery statement [33.2.2] and the final payment certificate is to be issued.

 

Question 2


I am in the process of preparing a final payment certificate in respect of a project where I am the appointed principal agent and have been instructed by the employer that he and the contractor have agreed that direct payments are to be made in respect of certain items and that these are to be removed from such certificate. Is this correct and am I obliged to comply with such instruction?

Ref: P33.002

Answer

In any agreement the parties are entitled to make alternative arrangements provided that these are not in conflict with the law or any other terms of their agreement. In this instance there is nothing which prohibits the arrangement between the employer and the contractor to which you refer and consequently you are obliged to comply with the employer’s instructions in order to give effect thereto.

As the principal agent you need to ensure that such arrangement is correctly administered in terms of the agreement which will require the following:-

1. the terms of such arrangement and the instruction from the employer are to be recorded in writing and annexed to the agreement;

2. the contract value is to be adjusted so as to take into account the direct payments;

3. the direct payments are to be included in the recovery statement to be issued with the final payment certificate; and

4. provision is to be made in the final payment certificate for the deduction of the direct payments from the amount due to the contractor as stated in the recovery statement.

By taking these steps there will be no change to the final contract value.