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Clause 38
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Question 1

On termination by the contractor 38.5.8 provides for the expiry of the security in terms of 14.0 and the return thereof to the contractor. The contractor opted for the withholding of payment in terms of 14.7.1. Does this imply that the current retention must be released or is it held and dealt with in the final account?

Ref: P38.001

Answer

Security as defined does not include "retention" which is an alternative thereto in terms of 14.7.1. 38.5.8 requires the security guarantee to be returned but as there isn't one the clause does not apply. However 38.5.7 clearly requires the continuing monthly certification of payment and in this case the retention must be reduced to zero and not held back as the contractor is not the defaulter. Note further that a payment certificate must be issued every month of the contract [31.1, 38.5.7] as well as in terms of the VAT and the Financial Management Acts.