Meaning of Practical Completion In Building Contracts

Following the recent judgment of Hong Kong's Court of Final Appeal in the case of Mariner International Hotels Ltd v Atlas Ltd, the term ‘practical completion’ in Hong Kong building contracts is now arguably a legal term of art which means a state of affairs in which the works have been completed free from patent defects other than ones to be ignored as trifling.

The facts

Two of Hong Kong's major property conglomerates, Sino and Hang Lung entered into an agreement for the sale and purchase of a hotel (the Agreement). The appellants in this case were part of the Sino group while the respondents were part of the Hang Lung group. The Agreement was dated 19 December 1996. The hotel was in the process of being built at the time the agreement was signed. Completion under the Agreement was to take place no later than 30 June 1998 and was conditional upon various events, including practical completion. The relevant clause requiring practical completion read as follows: