A Retention Bond is a type of performance bonds that protects the risk of the contractor's failure to perform the contract after the contractor finished the work or project. The Retention Bond is an agreement between a contractor and client by a third party known as a bond provider which acts as a guarantor.18-Dec-2015
What is a retention bond?
Retention bonds are way of avoiding problems associated with retention recovery. Amounts that would otherwise have been held as retention are instead paid, with a bond being provided to secure the amount. Similar to retention, the bond's value will usually reduce after the certification of practical completion.
Who pays for a retention bond?
Given that the level of security held by the employer remains unchanged, the contractor tends to pay for retention bonds as they are receiving a cash benefit. The retention bond premium is usually cheap compared to the cost of capital elsewhere however. and the opportunity cost of not having cash in the bank.
Is performance bond and retention the same?
RETENTION FUND is to ensure if Main Contractor fails to perform his obligation, Employer have Retention Fund to pay third parties to carry out default works or recover his cost and loss. … The performance bond is released by the employer to the contractor within three months after Practical Completion (Cl.
What is retention fund?
Retention Fund. A form of security, provided for in construction contracts, as limited security for the due performance of the contractor's obligations under the contract. The Fund accumulates by the owner retaining part of each progress payment due to the contractor until it reaches a maximum.
When should retention money be released?
Generally, a portion of the retention is released upon completion of the works. The remainder is released when the rectification period or defects liability period has expired and the relevant certification under the contract has been issued to confirm this.
What is retention guarantee?
Retention Money Guarantee is a written document issued to the owner or the buyer from the Bank to guarantee that applicant will continue to fulfill contract obligation after withdrawing final payment of the contract price in advance, at the request of construction contractor or supplier.
What is a retention bond JCT?
In essence, retention bonds are provided to the employer or contractor by a third party who acts as a guarantor of the contractor's or sub-contractor's due performance of his obligations.