No holdbacks: Overview, definition, and example
What is no holdbacks?
"No holdbacks" refers to a contractual provision stating that one party cannot withhold or delay a payment, service, or obligation that is due under the agreement. This ensures that payments or deliverables are made on time without unjustified deductions or delays.
For example, in a construction contract, a subcontractor may require a "no holdbacks" clause to prevent the general contractor from withholding payments once work has been completed as agreed. Similarly, in a service agreement, a consultant may include a no holdbacks clause to ensure they are paid in full without arbitrary deductions.
Why is no holdbacks important?
A no holdbacks clause is crucial for ensuring timely payments and preventing financial disputes. It protects businesses and individuals from unjustified delays or deductions, ensuring that they receive full compensation for their work or services.
For businesses, this clause helps maintain cash flow, improves financial predictability, and fosters trust in contractual relationships. Without it, one party might unfairly delay or reduce payments, causing financial strain for the other.
Understanding no holdbacks through an example
Imagine a marketing agency completes a project for a client. The contract includes a no holdbacks clause stating that the client must pay the full amount upon project completion. This prevents the client from delaying payment or withholding a portion of the fee without justification.
In another scenario, a supplier delivers goods to a retailer under a no holdbacks agreement. The retailer cannot withhold part of the payment unless there is a legitimate dispute over the quality or quantity of the goods. This ensures the supplier receives full and timely compensation.
An example of a no holdbacks clause
Here’s how a no holdbacks clause might appear in a contract:
“All payments due under this Agreement shall be made in full and on time, without holdbacks, deductions, or delays unless otherwise agreed in writing by both Parties. Any failure to make full payment shall constitute a material breach of this Agreement.”
Conclusion
A no holdbacks clause ensures that payments and obligations are fulfilled without unjustified delays or reductions. It protects businesses from financial uncertainty and promotes fairness in contractual agreements.
By including a no holdbacks clause in contracts, businesses can improve financial security, prevent payment disputes, and ensure smooth commercial transactions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.