Cause
This error is typical when the Custom Action (CA) is called at the improper sequencing. It is important that deferred, rollback and commit custom actions only be placed between InstallInitialize & InstallFinalize.

Solution
While custom actions allow to add functionality to the installation package that is not inherently supported by Windows Installer, careful consideration is to be made when to invoke them, execute them, install them, etc. If you are using deferred, rollback and commit custom actions in the package, these can only be placed between InstallInitialize & InstallFinalize. A validation tool should be able to catch this quite often.

More Info
About Custom Actions: MSDN
What would be the best way to diagnose error 2762 ?
ERRDOC: Windows Installer Error 2762: Q107550
ERRDOC: Windows Installer Error 2762: Q107446
Installation Phases and In-Script Execution Options for Custom Action in Windows Installer