What does a Final Account in Construction mean?

A final account in construction can mean different things to different people and varies between contracts. The term is generally used to describe the total amount that the employer pays to the contractor for the contract.

Usually, the final sum will reflect additional claims for extra work or variations, counterclaims for defects, and any financial losses each party may have suffered due to delays.

In practice, there is a great deal of confusion about the meaning of the final account.  It can refer to the final interim application or the final payment and/or account statement. The final interim payment is due directly after practical completion, but the final payment may not be payable until after the certificate of making good of defects is issued.

Sometimes, the final payment is not due until two years after practical completion. It is crucial for a payee to understand the term when making its ‘final account’ application. It may be wise to use the term ‘final interim application’. The correct term will vary from contract to contract.

The final account marks the formal end of the financial relationship between the employer and the contractor, save for any latent defects.

Contractual definitions of final accounts usually vary regarding terminology and procedures. However, whether they are Joint Contracts Tribunal (JCT) or New Engineering (NEC) contracts, the intention is the same in that the contractor prepares final accounts for the employer to review.

The parties need to be aware that the final account or final account statement procedures usually stipulate a short time limit to object to the proposed sum.

Failure to object in time may make the account or statement conclusive and not capable of challenge.