Sectional completion and partial possession by employer PP2 Coursework 1

1. SECTIONAL COMPLETION &
PARTIAL POSSESSION BY
EMPLOYER

2. Partial Possession
○ Premature or early occupation of parts or sections of the works before
practical completion.
○ Reason for such ‘premature’ possession and occupation of part of the
Works before practical completion:
- Business pressure - current demand and price is good so they need to
start business or production
- Commercial reasons - commencement date of Works has delayed so
the need to complete early, thus take partial possession for some
sections
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3. Partial Possession By
Employer
With Consent
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4. Partial Possession by
Employer (with consent)
○ Under Clause 16.0, the employer must comply with the following to get
partial possession:-
- To give written notice of intention to take partial possession to
contractor, so that the contractor can prepare himself and focus the
part of employer want to occupy.
- The partial possession occurs before practical completion.
- The employer to identify part to be taken over.
- The contractor has given his consent.
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5. Partial Possession by
Employer (with consent)
○ Clause 16.1 prohibits the Contractor from unreasonably withholding or
delaying consent. However, the Contractor is not bound to give consent
for partial possession.
○ The Contractor may withhold consent by reasons of:
- When partial possession may give rise to safety and health issues.
- When partial possession may materially disrupt the regular progress
of the remaining works.
- Where there is non-payment issue for work done.
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6. Certificate of Partial
Possession
○ Clause 16.1(a) requires the Architect to issue the Certificate of Partial
Completion within 14 days of taking partial possession of the Occupied
Parts.
○ The Certificate of Partial Completion shall state the following:-
(1) Date of partial possession
(2) Must have layout plan to identify or demarcate the occupied part
(3) Estimated value of the occupied part
○ The Architect should also identify relevant works not completed and to
list down schedule of defects for the Occupied Part and time frame of
rectifying the defects.
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7. Contractual Effects of Partial
Possession
(a) Practical Completion - Clause 16.1(b)
- The practical completion of the Occupied Part shall be deemed to have
occurred on the date of taking over the Occupied Part.
(b) Defects Liability Period - Clause 16.1(b)
- The DLP is deemed to have commenced on the date of practical
completion of the Occupied Part by the Employer.
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8. Contractual Effects of Partial
Possession
(c) Liquidated Damages - Clause 16.1(c)
- Liquidated damages shall be reduced by the ratio of the estimated value
of occupied part to the contract sum.
(d) Retention Sum - Clause 16.1(d)
- Under Clause 16.1(d), the Architect is required to:
i) issue a payment certificate to release the first moiety of the retention
fund in the ratio of the estimated value of the Occupied Part
ii) issue payment certificate within 14 days after the issuance of the
Certificate of Partial Completion
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9. Contractual Effects of Partial
Possession
(e) Certificate of Making Good Defects - Clause 16.1(e)
- Under Clause 16.1(e), where all defects in the Occupied Parts have been
made good, the Architect shall issue a CMGD.
(f) Release of Second Moiety of Retention - Clause 16.1(f)
- Under Clause 16.1(f), the Architect shall issue a certificate for the
release of the remaining retention fund (second moiety) for the
Occupied Part within 14 days after the issue of CMGD of the same
Occupied Part.
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10. Item Not Affected by Partial
Possession
a) Works Insurance
i) Clause 20.A.1 states that ‘the Contractor shall keep such works so insured
notwithstanding any arrangement for ……. partial possession’.
ii) Clause 20.B.1 and 20.C.1 contain similar provision as for Clause 20.A.1.
iii) The total sum insured of the above provisions is that the parties’
insurance obligations remain unaffected.
iv) The respective parties remain obliged to insure and keep the works
insured to the ‘full value’, there being no reduction for the value of the
Occupied Part.
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11. Item Not Affected by Partial
Possession
b) Performance Bond and Final Certificate
i) Clause 37 for Performance Bond does not indicate any deduction or
reduction of the bond value after partial possession.
ii) Clause 30.0 for Final Certificate are not affected by the partial possession
since there is only one Final Certificate issued.
iii) Hence, it can be inferred that both the Performance Bond and the Final
Certificate are to remain unaffected by the issuance of Certificate of Partial
Completion.
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12. Partial Possession By
Employer
Without Consent
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13. Partial Possession by
Employer (without consent)
○ If the Employer takes partial possession of the Occupied Part without
the Contractor’s consent, the Employer is in culpable breach of
contract.
○ Clause 16.2 is a provision which caters for the common practice where
the Employer does, or is forced to take over parts of the works before
practical completion without the Contractor’s consent.
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14. Restrictions on Employer’s
Rights to take partial
possession without
consent
○ Employer has no absolute rights
Employer has no absolute right to take possession of Occupied Part.
The contract placed certain restrictions on the Employer’s rights to do.
Pursuant to Clause 16.2(a) may take partial possession provided
three pre-conditions are met:
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15. Restrictions on Employer’s
Rights to take partial
possession without
consent
○ Employer has no absolute rights
i) The completion of Works have been delayed, and
ii) A Certificate of Non-Completion has been issued by
Architect under Clause 22.2, and
iii) Such entry and partial possession of the Occupied Part do not
unreasonably disturb the regular progress of the Contractor’s
remaining works or adversely affect the safety and health issues.
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16. Restrictions on Employer’s
Rights to take partial
possession without
consent
○ Employer has no absolute rights
For Clause 16.2(a) to be applicable, it may be implied that the
Certificate of Non-Completion (CNC) is still operative and the
Contractor is liable for liquidated damages.
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17. Restrictions on Employer’s
Rights to take partial
possession without
consent
○ Employer’s Rights limited by the Contract
i) Clause 16.2 uses the phrase ‘without prejudice to any other rights
and remedies which he may possess under the contract’.
This limits the Employer’s right to those under the contract only and
in the process excludes his common law right.
ii) Clause 16.2 makes it clear that the procedural and contractual effect
of Clause 16.2 are equally applicable as those under Clauses 16.1(a)
to (f).
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18. Restrictions on Employer’s
Rights to take partial
possession without
consent
○ Procedures following Partial Possession (with or without consent)
The provision of Clause 16.3 govern the Contractor’s duties following
partial possession by the Employer, whether with or without
Contractor’s consent.
i) Contractor to remove his site facilities, equipments, plants, materials,
etc from Occupied Part upon receipt of Architect’s written
instruction.
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19. Restrictions on Employer’s
Rights to take partial
possession without
consent
○ Procedures following Partial Possession (with or without consent)
ii) It is implied that the Architect must prescribe a definite time for
removal from the Occupied Part and this should be a reasonable
time frame.
iii) However, the contract is silent on consequences of non-compliance
by contractor with Architect’s written instruction to remove such
items.
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20. Restrictions on Employer’s
Rights to take partial
possession without
consent
○ Procedures following Partial Possession (with or without consent)
iv) It is also silent on remedies available to employer for such
Non-compliance by the Contractor.
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21. Sectional
Commencement Dates
and Sectional
Completion Dates
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22. Different
Commencement Dates
○ The Date of Commencement under Clause 21.1 assume that the whole
of the Site be handed over to the Contractor on such date.
○ If this is not possible, the Employer may want to plan for different
sections of the Site or phases to be handed over on different dates.
In this case, this information must be properly documented and made
known to the Contractor in the Contract so that he can price
accordingly.
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23. Different
Commencement Dates
○ The details of the different commencement dates must be recorded in
the Appendix to PAM contract as Sectional Commencement Date
under Clause 21.2, together with the demarcation layout showing the
different sections.
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24. Different
Commencement Dates
○ This clause is useful where the site is big or where piling works are
carried out under a separate contract. Completed piling areas can be
handed over to the building contractor to start work.
○ Sectional Commencement has the following advantages:
i) Save time as it allows over-lapping of construction activities being
carried out by different contractors on the same site, i.e. building
contractor are given parts of the completed parts of piling works to
commence while piling works continue in other parts.
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25. Different
Commencement Dates
○ Sectional Commencement has the following advantages:
ii) Improve cash-flow, Build according to sales and demand.
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26. Different
Completion Dates
The Sectional Completion Dates under Clause 21.3 can arise regardless of
whether the Site was handed over to the Contractor as a whole or in
sections. Employer may planned for completion of certain sections for
business or commercial reasons, such as phase completion of apartments to
improve cash-flow.
The details of the different completion dates must be recorded in the
Appendix to PAM contract, together with the demarcation layout showing
the different sections.
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27. Different
Completion Dates
Scenario 1: Date of Commencement (Single) => Completion Date (Single).
Scenario 2: Date of Commencement (Single) => Sectional Completion
Dates.
Scenario 3: Sectional Commencement Dates => Completion Date (Single).
Scenario 4: Sectional Commencement Dates => Sectional Completion
Dates.
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28. Different
Completion Dates
The contractual effect of Sectional Completion is the same as in Partial
Completion, when all the provisions in the Contract with regards to
Practical Completion and Defects Liability Period (clause 15.0); extension of
time (clause 23.0); Liquidated Damages (clause 22.2); release of Retention
Sum (clause 30.6); will apply to each section of the work as though it is a
separate and distinct contract.
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29. Different
Completion Dates
One common practice is for the Employer to state milestone dates or key
dates for works to be done in stages or phases (but not handed over) in the
Contract document but not as Sectional Completion in the Appendix.
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30. Different
Completion Dates
Disputes often arise if there is a failure to meet such dates and the question
being if liquidated damages can be imposed. The Employer may contend
that the milestone dates or key dates is on the same footing as Sectional
Completion dates and have the same effect.
On the other hand, Contractor may argue that the milestone dates are
merely part of the Contractor’s work programme and therefore doubtful
that it will be accorded the same contractual treatment as sectional
completion and may not be contractually effective.
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31. DISCUSSION
Coursework No. 1
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32. Explain the differences
between Sectional
Completion and Partial
Possession in PAM
2006.
Question 1

33. Answer
33
Sectional Completion Partial Possession
Clause 21.3 Clause 16.1
Contract agreed date No contract agreed date
Decided before the signage of
contract
Decided during construction
Architect to issue a Certificate of
Sectional Completion when the
sections of the Works are
Practically Completed.
Architect to issue a Certificate of
Partial Completion within fourteen
(14) Days from the date on which
the Employer has taken possession
of the Occupied Part.

34. Under what circumstance can
the Employer take partial
possession of the site?
Please explain for both partial
possession with and without
consent from the Contractor.
Question 2

35. Answer
Employer can take partial possession of the site under several
circumstances, where the reasons for such possession could be of
i) Business pressure
Current demand and price is good so they need to start business or
production.
ii) Commercial reasons
Commencement date of Works has been delayed so with the need
to complete early, Employer to take partial possession for some sections.
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36. Answer
iii) Under Clause 16.2, delayed of Completion of works by the
Contractor and issuance of Certificate of Non-Completion by the
Architect under Clause 22.1, and
iv) The entry and partial possession of the Occupied Part do not
unreasonably disturb the regular progress of the works or affect the
safety and health issues.
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37. Answer
Provided the Employer has comply with the following stated in Clause 16.0
i) To give written notice of intention to take partial possession to
contractor, so that contractor can prepare himself and focus the part of
employer want to occupy.
ii) The partial possession occurs before practical completion.
iii) The employer to identify part to be taken over.
iv) That the contractor has given his consent.
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38. Answer
Partial possession with consent from the Contractor:
Clause 16.1 prohibits the Contractor from unreasonably withholding or
delaying consent.
However, the Contractor is not bound to give consent for partial
possession.
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39. Answer
The Contractor may withhold consent by reasons of:
i) When partial possession may give rise to safety and health issues, or
ii) When partial possession may materially disrupt the regular progress
of the remaining works, or
iii) Where there is non-payment issue for work done.
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40. Answer
Partial possession without consent from the Contractor:
Under Clause 16.2, the Employer may take partial possession provided that
i) The completion of Works have been delayed, and
ii) A Certificate of Non-Completion has been issued by Architect under
clause 22.1, and
iii) Such entry and partial possession of the Occupied Part do not
unreasonably disturb the regular progress of the Contractor’s remaining
works or adversely affect the safety and health issues.
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41. Explain the contractual
implications of partial
possession and the items
not affected by it.
Question 3

42. Answer
(a) Practical Completion - Clause 16.1(b)
- The practical completion of the Occupied Part shall be deemed to have
occurred on the date of taking over the Occupied Part.
(b) Defects Liability Period - Clause 16.1(b)
- The DLP is deemed to have commenced on the date of practical
completion of the Occupied Part by the Employer.
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43. Answer
(c) Liquidated Damages - Clause 16.1(c)
- Liquidated damages shall be reduced by the ratio of the estimated value
of occupied part to the contract sum.
(d) Retention Sum - Clause 16.1(d)
- Under Clause 16.1(d), the Architect is required to:
i) issue a payment certificate to release the first moiety of the retention
fund in the ratio of the estimated value of the Occupied Part
ii) issue payment certificate within 14 days after the issuance of the
Certificate of Partial Completion
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44. Answer
(e) Certificate of Making Good Defects - Clause 16.1(e)
- Under Clause 16.1(e), where all defects in the Occupied Parts have been
made good, the Architect shall issue a CMGD.
(f) Release of Second Moiety of Retention - Clause 16.1(f)
- Under Clause 16.1(f), the Architect shall issue a certificate for the
release of the remaining retention fund (second moiety) for the
Occupied Part within 14 days after the issue of CMGD of the same
Occupied Part.
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45. Item Not Affected by Partial
Possession
a) Works Insurance
- Clause 20.A.1, Clause 20.B.1 and 20.C.1
- The total sum of the insurance must be remain unaffected and being no
reduction for the value of the Occupied Part.
b) Performance Bond and Final Certificate
- Clause 37 for Performance Bond does not indicate any deduction or
reduction of the bond value after partial possession.
- Clause 30.0 for Final Certificate are not affected by the partial
possession since there is only one Final Certificate issued.
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46. Additional
Questions
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47. An employer is trying to take partial possession
without the consent of the Contractor under the
following condition:-
i) A Certificate of Non-Completion has been issued
by Architect
ii) Subsequently, the contractor was granted an
EOT due to the delayed caused by relevant event
under Clause 23.8
Can the employer take partial possession without
the consent of the Contractor? Why?
Question 1

48. Answer
According to Clause 16.2 (a), the employer can take partial possession
without consent provided that the completion of the Works has been
delayed and a Certificate of Non-Completion has been issued by the
Architect under Clause 22.1.
In this case, the employer cannot take partial possession without
contractor’s consent because the delay is caused by the relevant event
under Clause 23.8. The contractor is then entitled to claim for EOT.
For Clause 16.2(a) to be applicable, it may be implied that the Certificate of
Non-Completion is still operative and the contractor is liable for liquidated
damages.
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49. In the construction industry
nowadays, most of the contractor
is willing to give consent for the
employer to get partial
possession. Why?
Question 2

50. Answer
(1) Defect Liability Period reduced - Clause 16.1 (b)
(2) Liquidated Damages reduced - Clause 16.1 (c)
(3) The first moiety of retention sum is released - Clause 16.1 (d)
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51. Does the employer have the
rights to take partial possession
without the Contractor's consent
under the common law?
Why and which clause stated so?
Question 3

52. Answer
No. Clause 16.2 uses the phrase ‘without prejudice to any other rights and
remedies which he may possess under the contract’.
This limits the Employer’s right to those under the contract only and in the
process excludes his common law rights.
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53. THANK YOU!
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54. Why is the value of the occupied
part had to be estimated?
Question Back up

55. Answer
The value of the occupied part had to be estimated because the implications
of partial possession affect some of contract values.
- Liquidated damages
- Retention Sum
According to Clause 16.1(c) and 16.1(d), both the liquidated damages and
retention sum shall be reduced by the ratio of the estimated value of the
occupied part to the contract sum.
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