Legal Question in Construction Law in California

Hi,

I'm a contractor and I'm trying to resolve a dispute with the client about the 10% retainage. The total sum of the project for example is $700,000; what is the retainage then? I also have a question if it's legal to even mention the retainage if 95% of the work has been completed. Below is the section of the contract that the client refers:

� 5.1.4.3 Subject to the provisions of the Contract Documents, the amount of each progress payment shall be computed as follows:

.1 Take that portion of the Contract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the total Contract Sum allocated to that portion of the Work in the approved schedule of values, less retainage of � ten � percent ( � 10 � %) except that no retainage shall be withheld on the line items in the Schedule of Values entitled "Insurance", "Bonds", "Fee" or "General Conditions Costs". Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included as provided in Section 7.3.9 of the General Conditions, as modified;

.2 Add that portion of the Contract Sum properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the completed construction (or, if approved in writing in advance by the Owner, suitably stored off the site at a location agreed upon in writing), less retainage of � ten � percent ( � 10 � %);

.3 Subtract the aggregate of previous payments made by the Owner; and

.4 Subtract amounts, if any, for which the Construction Manager or Architect has withheld or nullified a Certificate for Payment as provided in Section 9.5 of the General Conditions, as modified and

.5 Subtract amounts, if any, properly withheld by Owner as permitted in the Contract.


Asked on 10/29/12, 8:40 pm

1 Answer from Attorneys

You are asking for the solution to a math problem without providing any of the inputs. The total cost of the contract is the only number you give but it is totally irrelevant, as you can tell if you just read the contract provisions you quote. Retention is held from and calculated on progress payments. It is not calculated on the contract amount. The amount of the progress payment, less certain listed exclusions, times 10%, is the proper retainage for each payment. The sum of each properly calculated retainage on each progress payment is the proper amount of total retainage. The contract should say when the retainage is released. If it does not, then it would be due at the time the final payment is owed.

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Answered on 10/29/12, 9:24 pm


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