What does 'substantial completion' imply in a construction contract?

Substantial completion refers to a stage in a construction contract where the project is sufficiently complete for the owner to occupy or use it for its intended purpose, even if some minor finishing touches may still be pending. This concept is crucial because it marks a significant milestone in the project lifecycle, indicating that the essential components have been completed to a degree that the owner can begin using the building or space, which can often trigger certain contractual obligations, such as the commencement of warranties and the release of retention funds held by the owner.

Recognizing this stage is important as it can influence project timelines, financial arrangements, and the handover process between contractors and clients. Although there may still be minor work to complete, the primary functionality of the project has been established, making it a pivotal moment for stakeholders involved.