A provision in a contract for a certain part of payments to be held back is called what?

The term for a provision in a contract that specifies a certain part of payments to be held back is known as retainage. This practice is commonly used in construction contracts, where a portion of the payment to a contractor is withheld until the completion of the project or the achievement of specific milestones. The purpose of retainage is to ensure that the contractor has an incentive to complete the work satisfactorily and on schedule.

Retainage protects the party who is making the payments by providing leverage to ensure that any defects or incomplete work are addressed before the final payment is released. It also serves as a form of security for the client or project owner, ensuring that there are funds available in case of disputes or the need for corrections.

In contrast, the other terms listed do not accurately describe the specific provision of holding back payments in the context of contracts. Deferred payment refers to arrangements where payments are made later than usual but does not imply withholding a portion explicitly. Payment hold is a general term that might reflect delaying payment but lacks the formal recognition of being a contractual stipulation. Escrow involves a third party holding funds until specific conditions are met, which while related, is not the same as retaining a portion of a payment as leverage for performance.