What is a retention in a construction contract?

• A. Funds held back by the owner to ensure completion and quality, released after finalization.
• B. A bonus paid to the contractor for early completion.
• C. A penalty charged for delays.
• D. A discount offered for paying early.

Answer: (A)

Retention is the portion of money the owner withholds from the contractor’s payments to act as security that the work will be completed properly and any deficiencies will be corrected. It serves as a financial incentive for the contractor to finish all tasks to spec and to address any issues that come up during the defect-liability period. The withheld funds are typically released later, after final acceptance and once the project passes the required warranty or defect correction period.

This isn’t a bonus for finishing early, a penalty for delays, or a discount for paying early. Those options are incentives or penalties, not holdbacks tied to ensuring quality and completion.