Retention | Practical Law

Retention | Practical Law

Retention

Retention

Practical Law UK Glossary 0-107-7159 (Approx. 4 pages)

Glossary

Retention

In the context of an acquisition, the retention of part of the purchase price, either:
  • As security for the buyer in respect of potential breaches of warranty or indemnity. The retention arrangement is usually for a fixed period, which may mirror the warranty limitation period.
  • To secure the parties' payment (or repayment) obligations under a price adjustment mechanism.
Where a retention is agreed, the retained amount is often paid into an escrow account on completion of the transaction.
For further information, see Practice note, Structuring the purchase price: acquisitions: Retention arrangements (escrow).
In the context of an insurance policy, a retention is also known as an excess.