Business FinancesQuestion 51 of 690
What is the purpose of a "retainage" or "retention" clause in a construction contract?
a.To pay subcontractors before the general contractor
b.To fund project contingencies
c.To compensate the owner for delays
d.To allow the owner to withhold a portion of payment until project completion
Explanation
Retainage (typically 5–10% of each progress payment) is withheld by the owner as security until the project is substantially complete and defects are corrected. It motivates timely completion.
Law Reference: Civil Code §8812Practice all 690 questions free — no signup required.
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