A more thorough explanation:

Definition: Holdback is an amount of money that is kept back from the full payment of a contract until the other party completes some obligation. This is usually done to ensure that a contractor finishes the work agreed upon beforehand. The terms of a holdback are typically expressed in the contract. The holdback gives the contractor an incentive to finish the work, and the other party security that the work will be completed.

Example 1: A homeowner hires a contractor to renovate their kitchen. The contract states that 10% of the total payment will be held back until the contractor completes all the work. This ensures that the contractor finishes the job as agreed upon and to the homeowner's satisfaction.

Example 2: A company hires a software developer to create a new program. The contract states that 20% of the total payment will be held back until the developer fixes any bugs or issues that arise within the first month of the program's release. This ensures that the developer creates a high-quality program that works properly.

These examples illustrate how holdbacks work in contracts. By withholding a portion of the payment until the work is completed or meets certain standards, the other party has a guarantee that the work will be done properly. This also gives the contractor or developer an incentive to complete the work to the best of their ability.