
Retract
To retract means to withdraw a bid, offer, or statement before any relevant party acts on the information provided. If a buyer retracts a bid outside the contingency period for reasons outside the clauses in the contract, this usually results in the seller keeping the buyer’s earnest money to cover damages incurred from not completing the transaction. The Miller Act requires contractors on some government construction contracts to post bonds as a way of guaranteeing the performance of their contractual duties and the payment of their subcontractors and material suppliers. For example, the Miller Act requires contractors on some government construction contracts to post bonds as a way of guaranteeing the performance of their contractual duties. If the lowest bidder fails to honor its commitments, the owner is protected up to the amount of the bid bond–typically the difference between the low bid and next-highest responsive bid.

What Is a Retract?
To retract means to withdraw a bid, offer, or statement before any relevant party acts on the information provided. For example, it's common practice in real estate transactions to provide a deposit showing the buyer's intention to complete the transaction. This deposit is sometimes referred to as earnest money. If the buyer decides to retract the offer on the property, they may also be required to forfeit the deposit.



How a Retract Works
A retract–also referred to as a retraction–may happen because the bidder or seller sees new opportunities or unforeseen challenges, such as a job transfer, loss of income, or a better deal.
Retracts may occur in many different industries. A business may offer to buy another business but then retract the offer before the parties discuss the terms. In a situation like this, a retraction may have legal or financial consequences for the business that performs the retraction. A contractor may bid on a project but then retract its bid. This act can also have legal repercussions. Finally, a stock trader may also post a bid and/or offer and then retract it.
Examples of Retracts
Bid, performance, and payment bonds are required for most public construction projects. In the past, the federal government faced high failure rates among private firms performing public construction projects. Many contractors were insolvent when the jobs were awarded or became insolvent before finishing the project. When the government was left with unfinished projects, taxpayers were forced to cover the additional costs of completing the project. Since government property is not subject to a mechanic’s lien if a contractor failed to complete a project for the federal government, it meant that laborers, material suppliers, and subcontractors often went unpaid.
In 1894, the U.S. Congress passed the Heard Act, authorizing the use of corporate surety bonds for securing privately-performed federal construction contracts. The Heard Act was replaced in 1935 by the Miller Act, which currently requires performance and payment bonds on federal construction projects. The Miller Act requires contractors on some government construction contracts to post bonds as a way of guaranteeing the performance of their contractual duties and the payment of their subcontractors and material suppliers.
Since most U.S. public construction is performed by private sector firms, the work is typically given to the lowest bidder. A bid bond is often used to prevent firms from retracting their bids, assuring the government that the successful bidder performs according to the contract’s terms and conditions at the agreed-upon cost within the time allotted. If the lowest bidder fails to honor its commitments, the owner is protected up to the amount of the bid bond–typically the difference between the low bid and next-highest responsive bid.
Retracts can also occur at some point during the course of a real estate transaction. During the contingency period, after a contract is signed and earnest money is secured, all contract requirements must be met for the buyer and seller to move forward with the transaction. For example, the home may be appraised and inspected, and the buyer must secure appropriate financing (which is sometimes contingent on the appraisal or inspection).
The home purchase is not complete if, for example, the home inspector finds the roof needs replacing or another issue arises (assuming the sales contract was subject to an inspection condition). The buyer may retract their bid with a full return of earnest money; the seller may proceed to find a new buyer.
If a buyer retracts a bid outside the contingency period for reasons outside the clauses in the contract, this usually results in the seller keeping the buyer’s earnest money to cover damages incurred from not completing the transaction.
Related terms:
Bid Bond
A bid bond is a debt secured by a bidder for a construction job, or similar type of bid-based selection process, for the purpose of providing a guarantee to the project owner that the bidder will take on the job if selected. read more
Bid
A bid is an offer made by an investor, trader, or dealer to buy a security that stipulates the price and the quantity the buyer is willing to purchase. read more
Closing Costs
Closing costs are the expenses, beyond the property itself, that buyers and sellers incur to finalize a real estate transaction. read more
Completion Bond
A completion bond is a financial contract that ensures that a given project will be completed even if the contractor runs out of money. read more
Contingency Clause
A contingency clause is a contract provision that requires a specific event or action to take place in order for the contract to be considered valid. read more
Earnest Money
Earnest money is a deposit made to a seller, often in real estate transactions, that shows the buyer's good faith in a transaction. read more
Home Inspection
A home inspection is an examination of the condition and safety of a real estate property. read more
Mechanic's Lien
A mechanic's lien is a legal guarantee of payment to builders, contractors, and subcontractors for the building or renovation of a property. read more
Mergers and Acquisitions (M&A)
Mergers and acquisitions (M&A) refers to the consolidation of companies or assets through various types of financial transactions. read more
Performance Bond
A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet obligations in the contract. read more