By AIA Contract Documents
November 18, 2022
One key difference between maintenance contracts and construction contracts is the process that the contractor goes through to achieve completion of its work. Construction contracts typically set up a two-step process for completion, yet this two-step process is often entirely incompatible with a maintenance contractor’s work and how a maintenance contractor achieves completion. Given this, it is often unworkable (and confusing) to use a construction contract to hire a maintenance contractor.
In a construction contract, the contractor is expected to reach an interim level of completion referred to as substantial completion. Substantial completion is defined as the stage in the progress of the work when the work is sufficiently complete so that the owner can occupy or utilize the work for its intended use. Substantial completion is a key milestone in a construction project and often acts as the demarcation line for key events. It’s usually the event that (a) triggers the release of retainage money to the contractor, (b) starts warranty periods and claims limitations periods, and (3) is the transition of key responsibilities between the contractor and the owner. Substantial completion is usually certified by the project architect after a detailed inspection.
Once the contractor has achieved substantial completion, the contractor works towards final completion. Final completion is also significant as it is the moment when the contractor is entitled to full and final payment for its work, and when the contractor is expected to release and waive its lien rights to the property. Yet, while both stages of completion are important, substantial completion is often perceived as the more consequential milestone given all the risk shifting activities that are triggered upon certification of substantial completion.
Maintenance contracts, on the other hand, rarely include such a two-step process for the contractor to achieve completion. Substantial completion is simply not a common feature of maintenance contracts due to the comparatively small scale of maintenance work compared to what is included in a construction contract. AIA Document F201TM-2023, Work Order for As Needed Maintenance Work shows how straightforward the completion terms of a maintenance contract can be.
F201-2023, Work Order for As-Needed Maintenance Work 2.1 The Maintenance Work of this Work Order Contract shall commence on << >> (insert date) and be completed on or by << >> (insert date). These dates are subject to adjustments as provided in the Agreement and Work Order Contract. Time limits stated herein are of the essence of this Work Order Contract.
Other maintenance contracts, by their very nature, have no definition or expectation of completion. These maintenance contracts are ongoing in nature and require the maintenance contractor to perform regularly scheduled services on a weekly or monthly basis. These “ongoing” maintenance contracts are often structured as having a term for performance of the work, rather than having a date certain by which completion is to be achieved. The F202-2023, Work Order for Ongoing Maintenance Work provides an example:
F202-2023, Work Order for Ongoing Maintenance Work §2.1 The Maintenance Work of this Work Order Contract shall commence on << >> (insert date). Unless otherwise set forth below, the Work Order Term shall be one year from this Maintenance Work Commencement. The Work Order Term may be extended by written amendment in accordance with the Agreement. If the Work Order Term is not extended or terminated at the end of the Work Order Term, it shall be automatically extended on a month-to-month basis. (Insert the Work Order Term if other than one-year from the Maintenance Work Commencement.)<< >>
The upshot of these differences is that it is often difficult to use construction contracts to hire a maintenance contractor. In the end, so much of the construction contract must be redacted to strip out rights and obligations that flow from substantial completion that it often is not worth it.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.