A retention amount is money the other party holds back from each payment you're owed—usually 5-10%—and only pays you later (often after the project ends). This protects them if your work is defective or incomplete. For example, if you invoice for £10,000, they might only pay £9,000 now and hold £1,000 until final inspection. Legally, this is common in construction and service contracts under UK law, but the retained money is still yours—they're just holding it as security. The risk is that if the other party goes bankrupt, you may never get the retained amount back.
Negotiate a clear release date for retained amounts (e.g., 30 days after project completion) and ask for interest to be paid on the held money if it's kept for more than 60 days. Request that retention only applies to a specific percentage and only for genuine defects—not as a blanket safety net for all their concerns. ---
Frequently Asked Questions
What does this clause mean in simple terms?
A retention amount is money the other party holds back from each payment you're owed—usually 5-10%—and only pays you later (often after the project ends).
Why should I care about this clause?
This protects them if your work is defective or incomplete.
What are my options?
For example, if you invoice for £10,000, they might only pay £9,000 now and hold £1,000 until final inspection.
How does this affect small businesses?
Legally, this is common in construction and service contracts under UK law, but the retained money is still yours—they're just holding it as security.