Legal Definitions - retained fund

Definition: A retained fund is a sum of money that is held back or withheld by a client or customer from a contractor or supplier until the completion of a project or delivery of goods or services. This is also known as retainage.

Example: A construction company is hired to build a new office building for a client. The client agrees to pay the construction company $1 million for the project, but withholds 10% ($100,000) as a retained fund until the project is completed. Once the project is finished and the client is satisfied with the work, the retained fund is released to the construction company.

Explanation: The example illustrates how a retained fund works in the context of a construction project. The client holds back a portion of the payment as a guarantee that the construction company will complete the project to their satisfaction. This ensures that the construction company has an incentive to complete the project on time and to the required standard. Once the project is completed, the retained fund is released to the construction company as a final payment.