Contracts guidance marks step towards outlawing retentions

Brenna Baye from our Construction team recently discussed the new guidance from the Construction Leadership Council concerning the use of retention clauses under NEC forms of contract, in an article in November’s Construction Law magazine. 

Construction lawyers have welcomed new guidance on the use of retention clauses under NEC forms of contract, which emphasises that a retention fund may not always be required on projects. However they question the value of proposed alternative protections for clients, particularly on smaller schemes.

The guidance comes from the Construction Leadership Council – in collaboration with NEC – and forms part of the group’s ambition to move the industry to zero retentions by 2025.

Retention funds are used to provide security against defective work and the risk of insolvencies in the supply chain. However they are known to create problems for businesses due to late and non-payment, or ‘upstream’ insolvency resulting in withheld funds being permanently lost.

“The long term aim is to eliminate the need for retentions altogether,” said the CLC’s Business Models Workstream chair Steve Bratt. “This guidance illustrates that often the need for retentions can be avoided through good contract management and selection of contractors with a good track record of quality work.”…

Read the full article on Construction Law’s website (free account required)