Final Payment

Final payment is the conclusive settlement of all amounts due under a contract, made after the defects liability period has expired, outstanding defects have been remedied, and the engineer or contract administrator has issued the final payment certificate confirming the agreed total contract price.

What is Final Payment?

Under standard international contract forms such as FIDIC Red and Yellow Books, final payment is preceded by the contractor submitting a final statement showing all amounts claimed as due, including any outstanding claims-and-disputes it wishes to pursue. The engineer reviews this statement, adjusts for any items in dispute or not accepted, and issues a final payment certificate. The employer then pays the certified amount, which typically includes the second tranche of retention-money, within the payment period specified in the contract. Once the final payment certificate is issued and paid, and the contractor accepts the payment, the contractor's claims under the contract are generally exhausted, making the finalisation process a significant legal step.

Final payment should not be confused with the final payment certificate issued at the end of the defects liability period. Some contracts use "final account" to describe the agreed total price arrived at through measurement and variation adjustments, with the final payment certificate being the instrument that triggers the actual payment of the balance.

Why Final Payment matters for bidders

Suppliers often underestimate how long it takes to close out a contract and receive final payment. The defects liability period alone adds 12 months after handover, and if there are outstanding variations or claims, the final account process can extend much further. Track every variation-order and every claim meticulously throughout the contract so that your final statement is well-supported and reduces the risk of dispute at closeout. Present a complete, well-organised final statement promptly after the defects liability period to start the clock on the engineer's review. Delayed final payment ties up both the second retention tranche and any claim settlements.

FAQ

When is final payment made?

Final payment is made after the defects liability period expires, outstanding defects are remedied, and the engineer issues the final payment certificate. This is typically 12 to 24 months after substantial completion.

Does accepting final payment waive remaining claims?

Under many standard forms, the contractor's acceptance of the final payment certificate is treated as full and final settlement of all amounts due, so any unresolved disputes must be submitted before or during the final statement process.

What is included in the final payment?

Final payment typically includes the outstanding contract balance, the second tranche of retention, any accepted variation amounts, and any agreed claim settlements, less any amounts already paid or set off.