Chapter 9 Final certificates
A contractor will make a final claim in the manner and timeframe prescribed by the contract, when it considers that it has completed the work and fulfilled its obligations under the contract (usually, at the end of the defects liability period). A final certificate is then issued by the superintendent certifying that defects ascertained during the defects liability period have been rectified.
The final certificate is generally seen as evidence that the parties have completed and discharged their obligations under the contract. There are exceptions in respect of certain matters such as fraud, clerical errors or defects that are not apparent at the end of the defects liability periods and not discoverable at the time on reasonable inspection. The final certificate is also generally intended to be the final financial statement of the parties’ rights under the contract, including all required adjustments of the contract sum.
However, in some circumstances, either because of the terms of the contract or the terms of the certificate itself, the certificate will not be regarded as ‘final and conclusive’.
Ian Delbridge Pty Ltd v Warrandyte High School Council 2 VR 545
- Under a building contract the architect could issue a final certificate. Unless notice in writing of a dispute was given within 14 days of presentation of the final certificate, the certificate was conclusive evidence of the amount payable to or by the contractor.
- The architect issued a final certificate which required the contractor to pay the principal $28,493.65. The certificate was accompanied by a letter from the architect stating that adjustments to the final balance would be made when the contractor submitted certain information and referred to completion of rectification works. A contract summary indicating that the architect contemplated a further review of the contractor’s claim was also included.
- The court found that the document issued, although purporting to be a final certificate, was not intended by the architect to have the effect of a final certificate as contemplated by the contract.
- Given that the work was not complete and defects had not been rectified, the court found that there would have to be a further final certificate issued. As there was no provision in the contract for two final certificates, the court concluded that the document which had been issued was not, in fact, a final certificate for the purposes of the contract.
When considering whether the receipt of a final certificate prevents the principal from making further claims for defects or incomplete works, or whether a contractor can make a claim for further money (eg for delays or variations), a court is likely to carefully consider the drafting of the final certificate clause. To guard against further claims, it is recommended that a special condition is included clarifying the effect of the final certificate.
Upon issue of the final payment certificate, the principal is generally obliged to release any retention and security. Retention and security are discussed in detail in Chapter 7 – Security.