Retention Money Guarantee

Retention Money Guarantee

A Retention Money Guarantee ensures the buyer pays the retained portion of the contract sum to the contractor upon satisfactory project completion or defect rectification.

Main Components:

  • Function: Protects against non-payment.
  • Trigger: Satisfactory project completion or rectified defects.
  • Parties Involved: Buyer, Contractor, Guarantee Issuer (e.g., Banks, Insurance Companies).
  • Retention Money: Typically 5-10% of the contract sum.

Example Scenarios:

  • Construction Projects: Completion of structural work without defects.
  • Service Contracts: Fulfillment of service quality standards.

Entities:

  • Banks (e.g., JPMorgan Chase, Bank of America)
  • Insurance Companies (e.g., AIG, Allianz)
  • Contractors (e.g., Bechtel, Fluor)

Assessment:

  • Project inspection.
  • Quality audits.
  • Certification by designated authorities.
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