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ARTICLE · 23 DECEMBER 2020

Principles Governing Cash Retention In Construction Contracts

Shepherd and Wedderburn
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During the course of 2020, both the UK and Scottish Governments are carrying out consultations on cash retentions in the context of construction contracts.

United KingdomReal Estate and Construction
David Anderson
David Anderson
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During the course of 2020, both the UK and Scottish Governments are carrying out consultations on cash retentions in the context of construction contracts. In the recent case of Dr Jones Yeovil Limited v The Stepping Stone Group Limited [2020] EWHC 2308 (TCC), His Honour Judge Russen QC analysed the operation of retention in JCT contracts. The judgment confirmed that the proper purpose of retention is to incentivise rectification of any outstanding defects, or as security for the loss incurred if they are not. In addition, the case provides a rare discussion regarding the principle of transferred loss.

The dispute

The claimant was a contractor, Dr Jones Yeovil Ltd (DRJ), which had been engaged under three building contracts to build ten assisted living units and refurbish a building into an additional unit (the "Works") by the defendant property developer, Stepping Stone Group Ltd (SSG). The two contracts to build the units were in the form of the JCT Design and

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