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Simple English definitions for legal terms
retained fund
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A quick definition of retained fund:
Retained Fund: A retained fund is money that is held back or kept by someone as a form of security. It is also known as retainage. For example, if you hire a contractor to do some work for you, you may hold back a portion of the payment until the work is completed to your satisfaction. This is called a retained fund. It ensures that the contractor will complete the work properly and on time. Once the work is completed, the retained fund is released to the contractor.
A more thorough explanation:
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.