Contract retainage is so customary in the construction industry that parties sometimes forget it is consensual, a matter of contract. There may be statutory mandates for certain retainage on some public works contracts. But generally, it is determined by the parties themselves. The retainage may be 10 percent or five percent; the percentage may be reduced at certain milestones of the work; the retainage may be partially released upon substantial completion.

A recent case in Minnesota involved a retainage arrangement that was really outside the norm. To avoid losing work on a municipal project that would otherwise fall through, a contractor agreed to offer its contract retainage as collateral to secure a real estate developer’s payment of special assessments to the municipality. The contractor successfully completed its contract with the municipality. But, the developer defaulted on the special assessment obligation. The contractor lost its retainage despite its completion of the contract.

Other cases this week addressed the submission of past performance references and a contract requirement to itemize the cost elements of a claim. To ensure the integrity of the information, the references had to be submitted directly by the reference itself, not through the contractor. And, failure to itemize costs in a notice of claim could constitute a waiver of that claim by the contractor.