Reading a Construction Contract: Key Clauses

The contract controls your money, your risk, and your remedies. Read every clause before you sign — "we'll work it out" is how contractors go broke.

Clauses that decide your fate

• Scope of work — exactly what you're (and aren't) responsible for. Vague scope = disputes.
• Payment terms — schedule of values, progress billing, retainage (often 5–10% held back), and when payment is actually due (pay-when-paid vs. pay-if-paid — a big difference).
• Changes clause — how extra work is priced and approved (almost always in writing).
• Schedule & delay — completion dates, liquidated damages, and notice requirements.
• Indemnification & insurance — who covers whom when something goes wrong.
• Termination — for cause vs. for convenience (owner can fire you with no fault).
• Dispute resolution — mediation/arbitration/litigation, venue, and attorney-fee clauses.

Flow-down & order of precedence

On subcontracts, flow-down clauses bind you to terms in the prime contract you may never have seen — ask for it. And know the order of precedence when documents conflict.

Takeaway: Read every clause before signing — scope, payment (watch pay-if-paid and retainage), changes, delay/LDs, indemnity, termination, and dispute terms decide whether a job makes or loses money.

Educational overview — not legal advice. Construction law varies by state and by contract; consult a licensed construction attorney for your situation.