Statutory holdback or contract holdback is the legal requirement found in most common law jurisdictions'

contract law A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more Party (law), parties. A contract typically involves consent to transfer of goods, Service (economics), services, money, or pr ...

that requires an owner engaging a contractor to hold a particular percentage of payment for a stipulated length of time. This is done to ensure that any and all parties working on a contract are paid. Any subcontractors who have worked on the project are entitled to payment based on quantum meruit, and the courts will allow a

lien A lien ( or ) is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the ''lienee'' and the pers ...

against any property which their work has improved, should they not receive payment. In order to expedite and simplify the overall process, holdbacks can be claimed against by any subcontractors who are denied payment by the contractor who employed them on the project. Under these conditions, the subcontractor may collect payment from the owner, who then reduces his final payment (i.e. when releasing what remains of the holdback) to the contractor. Note that the subcontractor is entitled to payment based on quantum meruit, irrespective of whether or not the subcontractor has

privity of contract The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon anyone who is not a party to that contract. It is related to, but distinct from, the doctrine of considera ...

with the owner. In some jurisdictions, there are two or more holdbacks. For example,

Ontario Ontario is the southernmost Provinces and territories of Canada, province of Canada. Located in Central Canada, Ontario is the Population of Canada by province and territory, country's most populous province. As of the 2021 Canadian census, it ...

Canada Canada is a country in North America. Its Provinces and territories of Canada, ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, making it the world's List of coun ...

or the

British Columbia British Columbia is the westernmost Provinces and territories of Canada, province of Canada. Situated in the Pacific Northwest between the Pacific Ocean and the Rocky Mountains, the province has a diverse geography, with rugged landscapes that ...

Builders Lien ActStatutory holdback: British Columbia Builder Lein Act
Retrieved 2016-05-25 employs both a basic and a finishing holdback. The basic holdback is 10% of the total project cost, and is released after 45 days from substantial completion of a project. The finishing holdback is 10% of the value of work still left to be completed after substantial completion of the project, and is released only after 45 days from completion of the project.

References

Contract law {{Law-stub

See also

References