Contract retainage is intended to protect a project owner against deficient work, incomplete work and other forms of contract nonperformance. The 5–10% retained from each progress payment can add up to a significant sum over the course of the project. When project completion nears, the right to that retainage may become the source of disagreement.
The parties to a site improvement contract contested the contractor’s right to interest on unreleased retainage. The AIA contract form clearly called for interest on late progress payments, but was silent regarding interest on retained funds. A Pennsylvania court sidestepped a ruling on this issue, however, because the contractor had not provided the mechanic’s lien waivers that were a precondition to release of the retainage.
The other case in this issue involves the change order procedure in a fixed-price home construction contract. Neither party had followed the contractual procedure over the course of the project. Could the homeowners still challenge the builder’s pricing of upgraded or extra work?
