Early use Article with case law

Date: 07/09/2011
Unless there are express terms to the contrary, contracts generally grant to the Contractor
exclusive possession of the site and the works until Practical Completion occurs, at which
point the Employer regains exclusive possession.
However, this is not always a convenient arrangement for the Employer. The Employer often
wishes to utilise, occupy or even sell parts of the site as soon as sections of it can be
completed without having to await completion of the works as a whole. For such intention, in
the absence of an express provision for sectional completion, the option to take partial
possession included within the terms of a contract can appear attractive.
The JCT machinery
The JCT standard forms of contract provide for partial possession in terms which are simple
to implement. With the Contractor's consent (not to be unreasonably delayed or withheld), the
Employer can take possession of part of the works (the "Relevant Part"), before the works are
complete, and by so doing is commonly said to "take partial possession" of the Relevant Part.
However, it is important to note the significant contractual consequences that taking partial
possession has on apportionment of risks between the parties. In relation to the Relevant Part,
Practical Completion is deemed to have occurred, the Rectification Period begins to run,
liquidated damages are reduced "by the same proportion as the value of the Relevant Part
bears to the Contract Sum" and the insurance obligation of the Contractor for that Relevant
Part terminates.
As an alternative to taking formal partial possession, under the JCT forms of contract, the
Employer is entitled, with the Contractor's consent (again not to be unreasonably delayed or
withheld), to "use or occupy" the site or the works "whether for storage or otherwise". This is
commonly referred to as "early use" and has none of the consequences of partial possession.
The distinction between taking partial possession and having early use is where disputes can
often arise. When considering the ramifications of partial possession, it is no surprise that the
debate as to whether an Employer merely has early use of the site or works or he has taken
partial possession can turn contentious.
In a leading case on this issue, Impresa Castelli SPA v Cola Holdings Limited [2002], the
Court held that partial possession is about the Employer taking exclusive possession of part
of the site or works, save for allowing the Contractor access to rectify defects. However,
"use" and "access" is where the Contractor allows the Employer a lesser form of physical
presence of the incomplete works but still retains exclusive possession of the site or works.
Despite the findings in this case, the distinction can still be unclear and the decision in an
earlier case, English Industrial Estates Corporation v George Wimpey & Co [1973],
demonstrates that the paper trail created by the parties is all important in deciding whether the
Employer is merely using the site or works or whether he has regained exclusive possession.
In English Industrial Estates, the Employer was using production machinery and storing large
quantities of material in the virtually completed works to which Wimpey was trying to put the
'finishing touches'. Wimpey complained that this use by the Employer was delaying

Wimpey's works and initially advanced a claim for damages. The works then burnt down
which caused Wimpey to shift its position. Under the terms of the contract in question, which
was a form of RIBA contract with very similar wording to the modern JCT forms, the
insurance of the works was Wimpey's risk until completion, and accordingly Wimpey sought
to argue that the Employer had in fact taken partial possession of the works as it was using
the works to produce material. Having reviewed the terms of the contract which provided a
suitable machinery for the certification of possession and as no such certificate had been
issued, the Court concluded that, although in different circumstances the use by the
Employer, with the Contractor's consent, might constitute possession of the works, because
there was no definite handover the Employer had not taken possession of the works and the
insurance risk for the fire damage remained with Wimpey.
It is therefore imperative that when issues of possession arise the Contractor ensures that the
relevant contractual notices and/or certificates are in place to demonstrate that partial
possession has in fact occurred, otherwise, despite the Employer's use of the site or works
which might otherwise demonstrate that such part of the works is practically complete, the
risk in respect of delays, insurance and damage will remain with the Contractor.
An NEC3 Perspective
NEC3 deals with the issue in a different manner to the JCT forms of contracts. Under NEC3,
rather than being granted exclusive possession of the site, the Contractor is granted access to
the site only in so far as it is necessary for the Contractor to carry out the works and the
Contractor is required to allow access by "Others" as specified in the Works Information.
Before completion is certified, the Employer may be treated as having 'taken over' the works,
rather than 'taken partial possession'. However, not dissimilarly to JCT forms, when the
Employer 'takes over' the works, the Project Manager is obliged to assess the benefit to the
Employer of so doing, and to reduce the Delay Damages accordingly.
The question then arises "what does 'taking over' mean?". 'Take over' is only partially defined
in NEC3, which essentially states that the Employer 'takes over' the works when he begins to
'use' them. The derivation and logic of this provision result from the nature of NEC3 as an
engineering, rather than a building, contract. In the case of a power plant or a bridge, it is
usually clear when the works (as a whole) are put into use. In the case of a building
(particularly where the construction may be followed by separate fit-out or equipment
installation contracts) it is often less clear.
Unfortunately, there are no reported cases on the precise meaning of 'take over' or 'use' in the
NEC3 contract. It is therefore unclear what level of activity by the Employer constitutes
"use" and whether the activities of other direct contractors (i.e. "Others") can amount to use
"by the Employer". One interpretation of 'use' might be: "possession by the Employer to the
exclusion of the Contractor", i.e. when the Employer 'takes over' part of the works, the
Contractor loses his right to use and access that part of the works, save for rectifying defects.
In the absence of decided authority however, it would be dangerous to assume that taking
over cannot be found to have occurred unless the Employer has exclusive possession.
Perhaps a prudent course of action under NEC3 is to clearly define in the Works Information
those activities (by the Employer and by Others) which are permitted to take place during the
contract period, and which will not therefore amount to "use" or "taking over".

Practical Advice
The golden rule, as always, is to have the foresight at procurement stage to ensure that the
form of contract being put in place provides an adequate definition and mechanism for
allowing use or occupation and which provides clear and unequivocal consequences, or not as
the case may be, of using, occupying, taking over or taking possession of any part of the site
or the works at any stage before the whole of the works achieves practical completion, and
thereafter to ensure strict adherence to the contract procedure upon taking such use,
occupation or possession, in order to avoid unnecessary and costly disputes arising after the
event.
- See more at: http://www.pannone.com/media-centre/articles/construction-articles/bewarepartial-possession#sthash.r4FzyMSc.dpuf
What is practical completion and partial possession?
Posted by Adam Hiscox on April 28 2015 in Construction & engineering
Whether and/or when building works have achieved practical completion is a common
question which arises during the course of a project and one which often results in a dispute.
Practical completion
Practical completion is not defined in the standard JCT suite of building contracts but the
works are generally considered to be practically complete when there are no outstanding
defects (except for minor items or snagging) and the building can be put to its intended use.
Both contractually and practically the date of practical completion is important as it typically
means that:
the contractor no longer has exclusive possession of the site;
the contractors obligation to insure the works comes to an end;
the contractors liability for liquidated damages for delay ends;
time starts running in respect of the rectification period;
the contractor becomes entitled to part (often half) of the retention.
Partial possession
If an employer wants back part of the site before practical completion either to occupy a part
of the site early or to sell off a part of it, then often the contract is drafted to provide for
sectional completion.
Sometimes however it is not possible to predict this need and an employer may instead elect
to take partial possession of the site. In JCT terms the part of the site taken into possession is
known as the Relevant Part.
This has consequences however for the Relevant Part in the same way that Practical
Completion would have on the works as a whole. An employer and contractor must be alive
to the fact that in relation to the Relevant Part the contractors obligation to insure that part
comes to an end, liquidated damages are reduced by the same proportion as the value of the
Relevant Part has to the contract sum, the rectification period commences in respect of the
Relevant Part and the employer regains exclusive possession of the Relevant Part.

If an employer wants use of or to occupy the site or the works early then the JCT provides for
an option for this too. Crucially, the early use by an employer does not have the same
monetary relief for a contractor as partial possession.
Not surprisingly therefore the question of whether or not an employer has taken early use or
partial possession is a fertile ground of dispute. Whilst some authorities on the matter may
suggest that in order to answer that question one must look at whether or not the employers
physical possession was exclusive or whether it has a lesser presence, others point to the
need for a definite handover e.g. by way of a notice.
Applying the latter approach if a contractor does not issue the relevant notices then even if
the nature of the employer's use of the site/works which might otherwise arguably amount to
that part of the works being practically complete the lack of clear intention of that may lead
to the pre practical completion risks remaining with the contractor.
The need for certainty at the time cannot be underestimated. For example a contractor who
relies on the incorrect assumption that partial possession has occurred and duly cancels its
insurance for that part of the works, such an error could prove fatal.
For both employers and contractors alike suitable amendments to standard form contracts
such as the JCT forms of contract which are tailored to the project and which cater for the
anticipated needs of the employer and the contractor during the course of the works will be of
vital importance. This includes providing clear consequences for the employers use or
occupation and appropriate definitions of what constitutes partial possession. It is then up to
the parties to ensure that they apply the terms of the contract strictly.