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Retention in contract law is a term that refers to an important concept in the context of contracts. The primary purpose of retention is to ensure that the party who owes money under a contract pays the other party the full amount owed.

When one party enters into a contract with another, they assume certain obligations and responsibilities. One of the most significant responsibilities is the obligation to pay the agreed-upon amount. However, in some cases, one party may delay or refuse payment, which can be detrimental to the other party`s interests.

Retention can be used as a tool to help resolve this issue by withholding payment until the other party fulfills their obligations. Retention is a lever that can be used to protect the interests of one party if the other party breaches the contract or fails to meet their obligations.

In practice, retention involves withholding a certain percentage of the amount owed until the work or service is completed. This usually happens in the construction industry, where contractors and sub-contractors can undertake projects that last for months or even years.

For example, a contract might require the builder to complete the construction of a building within a specified period, say 9 months, and also provide a warranty period of 1 year. The owner may retain 10% of the payment until the warranty period has expired and any deficiencies have been rectified.

This means that the builder will not receive the full amount they are owed until they have fulfilled their obligations and delivered the completed building as agreed. In the event that the builder does not fulfill their obligations or completes the work to a substandard level, the owner can use the retained money to cover the costs of any necessary repairs or fixes.

Retention provides a level of security for both parties, ensuring that the builder will complete the work to the specified standard and that the owner will receive the completed project as expected.

In summary, retention is a vital concept in contract law that serves to protect the interests of both parties. It ensures that the party who owes money fulfills their obligations and pays the full amount owed. Retention is an essential tool that can be used effectively in various industries, especially in construction, where lengthy projects may require a longer-term retention period.