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A Guide to Retention monies held back by the client to insure against contractors’ failure.
The purpose of the retention is to ensure that the contractor properly completes the activities required of them under the contract. However, the reality is often that the contracts that include retentions do not link the deduction of the retention monies to the identification and resolution of defects other than by coincidentally identifying the release date for the second half of retentions as being the expiry of the defects liability period – known as ‘pay-when-certified’. Instead, they rely on the right in general law of the paying party to set-off any losses incurred as a result of non-performance by the supplier from monies owed by the paying party to the supplier, i.e. the retention monies.
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