How to Review a Construction Contract Before You Sign

Confirm the price basis: a fixed lump sum, cost-plus (with or without a guaranteed maximum), or a GMP. Then read how and when you get paid: the schedule of values, the application and certification process, the time the payer has to pay, and any condition that lets the payer hold or delay money.

Find the retainage percentage and — more importantly — when it is released. Retainage held until final completion of the entire project can tie up a subcontractor’s profit for many months after its own work is finished.

Read the change-order clause: whether changes require a signed written order before work, how extras are priced, markup limits, and whether directed or oral changes are compensable. Many payment fights start with work performed on a verbal instruction that the contract says is not payable.

Then read the schedule terms: the completion date, whether time is "of the essence," liquidated damages for delay (and whether they are capped), and any no-damages-for-delay clause that limits you to a time extension even when the other side caused the delay.

Read indemnity together with the insurance and additional-insured requirements; a broad-form indemnity that covers the other party’s own negligence is limited or void by anti-indemnity statutes in many states. Check lien rights and any lien-waiver-as-condition-of-payment language, whether performance and payment bonds are required, and the termination clause — for cause and for convenience — including what you are paid if the job is terminated.

These risk-shifting clauses decide who absorbs a loss when something goes wrong, so they deserve as much attention as the price.