When Can You Withhold Completion

When Can You Withhold Completion: Legal Grounds in South African Construction Law

“When can you withhold completion” is a frequently asked question in the South African construction industry. The term refers to the legal and practical circumstances under which an employer or contractor may lawfully refuse to issue or accept a certificate of completion. This issue often arises at the project close-out phase when construction defects, non-compliance with specifications, or incomplete snag lists complicate final delivery. It is crucial to understand the legal framework governing this decision, as withholding completion can have serious contractual and financial implications.

Withholding Completion Due to Construction Defects

One of the most common grounds for withholding completion is the presence of construction defects. South African courts have consistently recognised the right of an employer to reject completion where the work does not conform to agreed standards. In DHL Project & Chartering Ltd v Capricorn Marine (Pty) Ltd 2000 (4) SA 170 (SCA), the Supreme Court of Appeal affirmed that material defects entitle the aggrieved party to withhold performance, including completion certification.

This principle aligns with the doctrine of reciprocity in contracts: if a contractor has not fulfilled their obligations, the employer is not bound to perform either. Therefore, where latent or patent defects are evident, issuing a completion certificate would not be legally prudent.

Non-Compliance With Project Specifications

Another major consideration in determining when you can withhold completion is non-compliance with specifications. According to the JBCC Principal Building Agreement (Edition 6.2), clause 26.1 states that the works must be executed in accordance with the design documents and employer’s requirements. If there is deviation from these standards, the employer has a right to reject the work.

In City of Tshwane Metropolitan Municipality v Mavundla Projects Construction (Pty) Ltd [2018] ZAGPPHC 385, the court ruled that a failure to comply with contractually mandated specifications justified the withholding of a certificate of practical completion. This precedent strengthens the position that compliance is not optional but essential.

The Role of the Snag List in Withholding Completion

A snag list, also known as a punch list, enumerates incomplete or defective works that must be remedied before final handover. When a snag list remains unresolved, it creates legitimate grounds for withholding completion. The court in Minister of Public Works v Hencetrade 15 (Pty) Ltd [2008] ZASCA 92, acknowledged the importance of finalising all outstanding items before final certification.

Parties must be cautious, however. If the outstanding items are minor and do not impede the use or functionality of the structure, withholding completion could be seen as unreasonable. The JBCC contract and common law require a proportional approach: not every imperfection justifies refusal.

Contractual Terms and Their Legal Impact

The terms of the construction contract govern the criteria for completion. Contracts like the JBCC, NEC3, and FIDIC Red Book contain provisions that define completion, certification procedures, and defect liability periods. Therefore, any decision to withhold must be justifiable within the scope of the contract.

In Ekurhuleni Metropolitan Municipality v Kajima SA (Pty) Ltd [2013] ZASCA 25, the SCA underscored that parties are bound by their contract and that deviation from these provisions without legal basis constitutes a breach. Thus, withholding a certificate of completion in violation of the agreed process may expose the withholding party to damages.

Construction Defects and Delay in Completion Certification

When construction defects delay completion certification, the employer must carefully document the nature and extent of the issues. South African courts favour clear and contemporaneous records. Photographs, expert reports, and correspondence are critical in demonstrating that withholding was justified.

In Aveng Grinaker-LTA Building v Minister of Public Works [2011] ZAGPJHC 234, the court found that the delay in issuing the completion certificate was justified due to widespread structural issues. The ruling highlights the importance of comprehensive documentation to establish a defence against claims for wrongful withholding.

Remedies for Refusal to Issue Completion Certificate

Contractors facing an unjustified refusal can pursue several remedies. One option is adjudication, especially if the contract provides for it. Alternatively, the contractor may approach the High Court for a declaratory order, compelling issuance of the certificate.

The case of Murray & Roberts Construction (Pty) Ltd v Upington Municipality 2010 (6) SA 256 (SCA), illustrates how the courts can intervene when refusal to issue a completion certificate lacks legal justification. The contractor succeeded in claiming payment for works done, as the municipality’s refusal was found to be arbitrary and procedurally flawed.

Project Close-Out Disputes in South Africa

Project close-out is a complex phase involving financial reconciliation, retention release, and legal closure. Disputes at this stage often centre on whether the certificate of completion has been lawfully withheld. Arbitration clauses in construction contracts commonly govern the resolution process.

The Construction Industry Development Board (CIDB) Guidelines recommend that parties adopt dispute avoidance mechanisms, such as regular inspections and pre-handover meetings, to minimise project close-out disputes in South Africa. A proactive approach can save both parties significant time and legal costs.

Best Practices for Employers and Contractors

Both employers and contractors must adopt best practices to avoid disputes over when you can withhold completion. These include keeping detailed records, clearly documenting defects, issuing regular progress reports, and adhering to contract timelines. Legal advice should be sought early to avoid missteps.

Employers should avoid withholding for minor or cosmetic defects, while contractors must ensure that all specifications are met and snag lists resolved. Good faith conduct is not only a legal requirement but a practical necessity in maintaining industry reputation.

Navigating Withholding Certificate of Completion Legal Grounds

Understanding the withholding certificate of completion legal grounds is crucial for lawful project management. Contracts must be reviewed carefully, and parties should familiarise themselves with applicable clauses. Any withholding action must be proportional, substantiated, and procedurally sound.

As confirmed in Road Accident Fund v Mothupi 2000 (4) SA 38 (SCA), good faith and reasonable conduct underpin contractual performance. Even in adversarial contexts, courts look for fairness in the enforcement of rights.

FAQs: When Can You Withhold Completion

Can completion be withheld for minor defects?

Only if those defects materially affect the use or safety of the structure. Cosmetic issues rarely justify withholding.

What if the snag list is unresolved?

An unresolved snag list containing significant items can be a valid reason for withholding. Minor items generally are not.

Who issues the completion certificate?

Typically the principal agent or project manager. However, the contract governs who holds this authority.

What legal documents govern withholding completion?

Mainly the JBCC, NEC, FIDIC contracts, and South African common law principles on reciprocity.

Can a contractor challenge withholding?

Yes. Through adjudication, arbitration, or court proceedings, depending on the contract.

How should a contractor respond to unlawful withholding?

Gather evidence, notify the employer formally, and initiate dispute resolution processes.

Is withholding considered a breach of contract?

It can be, if not based on lawful grounds. Unjustified refusal is actionable.

Does withholding completion delay final payment?

Yes. Final payment is usually contingent on the completion certificate.

Can a certificate be issued conditionally?

Some contracts allow conditional certificates for practical completion, subject to completion of snag items.

What role does an independent expert play?

They can assess compliance with specifications and defects, strengthening the case for or against withholding.

References Table

Useful Links

• Construction Industry Development Board (CIDB) Best Practice Guidelines: Offers practical guidance on dispute avoidance and contract administration.
• JBCC Contract Resources: Key source for South African building contracts and certification procedures.
• International Federation of Consulting Engineers (FIDIC): For comparative standards and global best practices in construction law. 

  If your query is about how to amend a contract click here.

  If you would like to know more about suspension conditions and the effect they have on the termination of contracts click here.

  If you would like to know more about specific performance as an alternative to cancellation click here.

  If you would like to know more about the effect of estoppel when dealing with cancellations click here.

  If you would like to know more about the inter-play between novation and cancellation click here.

  If you would like a more in-depth article about the cancellation of contracts click here. 

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This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for errors, omissions, loss, or damage arising from reliance upon any information herein. Don’t hesitate to contact Meyer and Partners Attorneys Incorporated if you require further information or specific and detailed advice. Errors and omissions excepted (E&E).