Contrary to the commercial construction industry, in which prevenient agreements and purchase orders may be sufficient to govern the relationship between parties, contracts in residential construction must be formal in order to protect homeowners. Particularly, the Consumer Protection Act, 2002 has been deemed to apply to residential construction and renovation agreements.
In this case, the Court considers the importance of establishing a direct connection/chain between the party claiming a trust relationship and the party against whom trust obligations are imparted.
Despite its benefits, holdback has disadvantageous features to certain subcontractors in the context of larger-scale projects – early release assists with this problem.
