What does the term 'retainage' refer to in construction contracts?

The term 'retainage' in construction contracts specifically refers to a portion of the contract amount that is withheld from the contractor until the project is completed. This financial mechanism is intended to ensure that the contractor fulfills all aspects of the contract, including any final adjustments or corrections required before the project is deemed fully complete. By retaining a certain percentage of the payments, owners or clients aim to encourage performance quality and safeguard against potential defects or failures in the project that may surface shortly after completion.

The other options provide different aspects related to construction contracts but do not align with the definition of retainage. Warranty for project defects pertains to commitments made by contractors to rectify issues that arise post-construction. Detailed specifications of work outline the expectations and requirements for the project, while penalties for delays address consequences faced by contractors for not meeting deadlines. Each of these serves a different purpose within the overall context of a construction contract but does not capture the essence of what retainage signifies.