Retention Fund

A form of security, provided for in construction contracts, as limited security for the due performance of the contractor's obligations under the contract. The Fund accumulates by the owner retaining part of each progress payment due to the contractor until it reaches a maximum. At practical completion, a portion of the total fund is released to the contractor and on issue of the final certificate the balance is released if, in both cases, the contractor has fulfilled all obligations. If the contractor has not fulfilled all obligations the fund may be used to pay for deficiencies.