Retention bond

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Retention bond
See also

Retention bond is a deal between and entrepreneur and his sub-contractor which has to prevent the ordering party from deferring additional costs resulting from not fully accept of undertaking works[1]. The bond's value is usually between 2,5% up to 10% of the full contract value. The bond can be released both by the Bank or insurance company[2]. Retention bond stands for an alternative for money retention. This form is more preferable to use by the entrepreneurs because it does not need any financial contribution in advance[3].

See also: Retention money

Retention bond aim

The main goal is to guarantee a found which will let the project founder cover any additional costs caused by contractor's loss or default[4]. Moreover, the retention bond helps contractor regain costs from the surety in the following cases[5]:

  1. The failure of the company's sub-contractor
  2. Any additional expenses caused by destructions and losses made after employment expiration of the sub-contractors
  3. Any expenses (other than these marked in point 1 and 2) which the contractor bore, under the sub-contract

JCT Documents

According to The Joint Contracts Tribunal (JCT), retention bonds documents to be valid should include information such as[6]:

  • Contractor's name and address
  • Date of the bond
  • Name and address of the surety ( undertaking responsible for the bond's payment)
  • Maximum amount of money that the surety agrees to pay
  • Surety's address where a demand would be sent
  • Surety's address where a copy of notice including sub-contractors liability for the demanded demanded would be sent
  • Preparative date of the bond's expiration

To be legally-valid, the bonds must be signed by the surety or on its behalf.


  1. Bishop E (2004)
  2. Lester A (2007)
  3. Roberts M (2014)
  4. Ndekugri I,Rycroft M (2012)
  5. Barners P, Davies M.(2015)
  6. Barners P, Davies M(2009)


Author: Angelika Załęska