A certificate of substantial completion documents that work ordered through a contract has been completed with only minor issues remaining.
- Billing for work completed on a large project where only minor details remain unperformed
- Proving to your clients, investors, and business partners that work under a particular contract has been substantially completed
Parties have a great deal of latitude in negotiating payment terms in a contract for the sale of goods or services. Often, parties involved in a complex project will agree that payment should be made to a contractor upon “substantial completion” of the work required in the contract. In these cases, contractors must use a certificate of substantial completion to document that although they have not completed all of the work required under the contract, they have performed substantially all of it and as a result are entitled to payment. A certificate of substantial completion is often involved in construction and remodeling projects to prevent minor details from holding up the job. For example, consider a situation where someone hires a contractor to build their house under an agreement where payment is due upon substantial completion of the project. Once the house is constructed to a point that it is suitable for occupancy, the contractor can demand payment by presenting an invoice, certificate of substantial completion, and a “punch list” of items to be completed. Punch list items may include minor details such as landscaping, fencing, painting, or other finishing work, but so long as the project has been substantially completed the contractor is entitled to payment before finishing the listed items. By using this certificate of substantial completion, parties to an agreement can add an additional layer of certainty that the final payment under the contract signifies the substantial – but not total – completion of the agreement. Best practices dictate that this certificate of substantial completion should be submitted with a clear list of items remaining under the agreement and approximate dates that they will be accomplished.