Retention bond
| Retention bond |
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| 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]:
- The failure of the company's sub-contractor
- Any additional expenses caused by destructions and losses made after employment expiration of the sub-contractors
- 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.
Footnotes
References
- Barners P, Davies M (2009), Subcontracting Under the JCT 2005 Forms, John Wiley & Sons
- Barners P, Davies M (2015), The JCT 2011 Building Sub-contracts, John Wiley & Sons
- Bishop E (2004), Finance of International Trade, Butterworth-Heinemann
- Haar R,Levine M (2013), Construction Insurance,CRC Press
- Huse A.J (2002), Understanding and Negotiating Turnkey and EPC Contracts, Sweet & Maxwell
- Lester A (2007), Project Management, Planning and Control: Managing Engineering, Construction and Manufacturing Projects to PMI, APM and BSI Standards, Butterworth-Heinemann
- Ndekugri I,Rycroft M (2012), The JCT 05 Standard Building Contract,Routledge
- Roberts M (2014), MacRoberts on Scottish Construction Contracts, John Wiley & Sons
Author: Angelika Załęska
