De minimis principle and certificate of practical completion

Abstract

When a contractor thinks that his work has reached completion, he will notify the contract administrator for inspection. Thereafter the contractor administrator issues the Certificate of Practical Completion (CPC), provided that the defects are “minor” and contractor gives undertaking to rectify them. Standard forms of contract generally regard CPC can be issued notwithstanding there are works of very minor nature uncompleted. However there is no explanation on minor defects in the standard forms. As such, there is a question on the extent on the nature of minor defects that is allowed for the issuance of CPC. Contract administrator normally exercises his discretionary in issuing the certificate and it is always a question of fact and degree whether the defects are minor or otherwise. This issue of whether the defects are minor or major can give rise to disputes between the employer and the contract administrator on his behalf and the contractor. Therefore the aim of this research is to propose a checklist to determine whether the defects are minor or de minimis prior of the issuance of CPC. The scope of this research is limited to the cases related defects and practical completion in construction contracts. This research is conducted through the analysis of law cases reported in the Malayan Law Journal (MLJ/ MLJU) and English cases that are retrieved from Lexis Malaysia online database and literature. There are eleven cases retrieved and analysed in this research. The methodology used in this research involved four stages commencing from the initial stage until the conclusion and recommendation. The cases analysed based on the facts, the issues and the judgements. Based on the analysis, there are four items in the checklist that a contract administrator should observed when making decision whether or not to issue the CPC. The items are: one, the minor defects must not prevent the use of the project for the intended purpose; two, the contractor must be able to be carried out the rectification within the defects liability period; three, the cost of rectification must be within the outstanding retention fund or the performance bond; and four, the services such as water and electricity has been completed.