🔥 Limited Time:First analysis FREE (usually $47)
23:45:00
Claim Now
SubShieldAnalyze Contract

Construction Contract Glossary

Plain English explanations of 25+ contract terms every subcontractor should know.

PaymentRisk TransferScheduleGeneralTerminationInsurancePayment SecurityChangesClaimsWarrantyCompletionDelaysDisputes

Payment

Pay-If-Paid

CRITICAL

A clause making the GC's payment obligation conditional on receiving payment from the owner. If the owner doesn't pay, the subcontractor has no right to collect.

EXAMPLE LANGUAGE

"Payment to Subcontractor is expressly conditioned upon receipt of payment from Owner."

💡 Tip:Void in CA, NY, NC, SC, WI, NV. Negotiate for pay-when-paid with a maximum delay period instead.

Pay-When-Paid

WARNING

A clause setting payment timing based on when the GC receives payment, but not making it a condition. The GC must pay within a reasonable time regardless.

EXAMPLE LANGUAGE

"Payment within 30 days of Contractor's receipt of payment from Owner."

💡 Tip:Better than pay-if-paid, but negotiate a maximum delay cap (e.g., 45-60 days) regardless of owner payment.

Retainage

WARNING

A percentage of each payment withheld until project completion. Industry standard is 5%.

EXAMPLE LANGUAGE

"Contractor shall retain 10% of each progress payment until final completion."

💡 Tip:Negotiate for 5% maximum, reduced to 2.5% after 50% completion, released upon YOUR completion not project completion.

Risk Transfer

Broad Form Indemnification

CRITICAL

Requires you to indemnify the GC even for their own negligence. Creates unlimited liability exposure.

EXAMPLE LANGUAGE

"Subcontractor shall indemnify Contractor from all claims regardless of whether caused by Contractor's negligence."

💡 Tip:Void in 40+ states. Negotiate for comparative fault indemnification limited to your own negligence.

Intermediate Form Indemnification

WARNING

Requires indemnification for your negligence and shared negligence, but not the GC's sole negligence.

EXAMPLE LANGUAGE

"Subcontractor shall indemnify Contractor except for Contractor's sole negligence."

💡 Tip:More balanced than broad form, but still shifts some of GC's risk to you.

Comparative Fault Indemnification

CAUTION

You only indemnify for claims proportionate to your actual fault. The fairest form.

EXAMPLE LANGUAGE

"Subcontractor indemnifies only to the extent caused by Subcontractor's negligent acts."

💡 Tip:This is the AIA A401 standard. Accept this language.

Schedule

No-Damage-For-Delay

CRITICAL

Waives your right to recover costs when others delay your work. Your only remedy is a time extension.

EXAMPLE LANGUAGE

"Subcontractor's sole remedy for delay shall be an extension of time. Subcontractor waives all delay damages."

💡 Tip:Negotiate exceptions for GC's active interference, bad faith, or delays exceeding 30 days.

Liquidated Damages

WARNING

Pre-set daily damages for late completion. Often flows down from the prime contract.

EXAMPLE LANGUAGE

"Subcontractor shall be liable for liquidated damages of $2,000 per day for late completion."

💡 Tip:Ensure the amount is proportionate to your contract value. Negotiate a cap on total exposure.

General

Flow-Down Clause

WARNING

Makes you bound by all terms of the prime contract between GC and owner, often without seeing it.

EXAMPLE LANGUAGE

"All terms of the Prime Contract are incorporated herein and binding on Subcontractor."

💡 Tip:Request a copy of the prime contract, or ask to list specific flow-down terms in an exhibit.

Termination

Termination for Convenience

WARNING

Allows the GC to cancel your contract at any time without cause. You lose future profit.

EXAMPLE LANGUAGE

"Contractor may terminate this Agreement for convenience upon 7 days notice."

💡 Tip:Negotiate for payment of work done, demobilization costs, and 5% of remaining contract value.

Termination for Cause

CAUTION

Allows termination when you breach the contract. Usually includes a cure period.

EXAMPLE LANGUAGE

"Contractor may terminate for cause if Subcontractor fails to cure default within 10 days of notice."

💡 Tip:Ensure cure period is reasonable (7-14 days minimum) and covers only material breaches.

Insurance

Waiver of Subrogation

CAUTION

Prevents your insurance company from suing the GC to recover claim payments.

EXAMPLE LANGUAGE

"Subcontractor waives all rights of subrogation against Contractor."

💡 Tip:Check with your insurance carrier - may require policy endorsement and additional premium.

Additional Insured

CAUTION

Requires you to add the GC to your insurance policy, giving them coverage under your policy.

EXAMPLE LANGUAGE

"Subcontractor shall name Contractor as additional insured on all policies."

💡 Tip:Standard requirement. Ensure "additional insured" status only covers your operations, not GC's negligence.

Primary and Non-Contributory

WARNING

Your insurance pays first, before the GC's insurance, and doesn't share costs.

EXAMPLE LANGUAGE

"Subcontractor's insurance shall be primary and non-contributory."

💡 Tip:Increases your insurance exposure. May require policy endorsement.

Payment Security

Mechanic's Lien

N/A

Your legal right to place a claim on the property if you're not paid. Deadlines vary by state.

EXAMPLE LANGUAGE

Not a contract term - it's a statutory right.

💡 Tip:Know your state's deadlines. Most require preliminary notice within 20-60 days of first work.

Lien Waiver

WARNING

Document releasing your lien rights. Can be conditional (upon payment) or unconditional.

EXAMPLE LANGUAGE

"Subcontractor shall provide unconditional lien waivers with each payment application."

💡 Tip:Never give unconditional waivers until payment clears. Conditional waivers protect your rights.

Changes

Change Order

CAUTION

A formal modification to the contract scope, price, or schedule. Usually requires written approval.

EXAMPLE LANGUAGE

"No change shall be valid unless approved in writing by Contractor."

💡 Tip:Document everything. Submit change order requests promptly per contract notice requirements.

Constructive Change

N/A

When the GC directs extra work without a formal change order. You may still be entitled to payment.

EXAMPLE LANGUAGE

Not typically in contract language - it's a legal concept.

💡 Tip:Document all directions that differ from the original scope, even if verbal.

Claims

Notice Requirements

WARNING

Mandatory deadlines for notifying the GC of claims, changes, or delays. Missing them can waive your rights.

EXAMPLE LANGUAGE

"Subcontractor shall provide written notice of claims within 48 hours."

💡 Tip:Calendar all notice deadlines. 48 hours is too short - negotiate for 7-14 days minimum.

Warranty

Warranty Period

WARNING

How long you're responsible for defects in your work. Industry standard is 1 year.

EXAMPLE LANGUAGE

"Subcontractor warrants work for three (3) years from substantial completion."

💡 Tip:Negotiate for 1 year maximum, or match manufacturer warranties.

Completion

Substantial Completion

N/A

When work is sufficiently complete for its intended use. Triggers warranty periods and final payment.

EXAMPLE LANGUAGE

"Substantial Completion occurs when the Work is sufficiently complete for Owner's intended use."

💡 Tip:Push for YOUR substantial completion to be the trigger, not the overall project.

Punch List

CAUTION

List of minor items to complete or correct after substantial completion.

EXAMPLE LANGUAGE

"Subcontractor shall complete punch list items within 30 days."

💡 Tip:Negotiate reasonable completion timeframes and ensure punch list doesn't block payment.

Delays

Force Majeure

CAUTION

Unforeseeable events (natural disasters, pandemics) that excuse performance. May grant time extensions.

EXAMPLE LANGUAGE

"Neither party shall be liable for delays due to acts of God, war, or pandemic."

💡 Tip:Ensure the clause covers both time extensions AND cost recovery for extended general conditions.

Disputes

Dispute Resolution

WARNING

How contract disputes will be resolved - litigation, arbitration, or mediation.

EXAMPLE LANGUAGE

"All disputes shall be resolved by binding arbitration in Delaware."

💡 Tip:Avoid distant venue clauses. Negotiate for disputes to be resolved where the project is located.

Prevailing Party

CAUTION

The winner of a dispute may recover attorney's fees from the loser.

EXAMPLE LANGUAGE

"The prevailing party shall be entitled to recover reasonable attorney's fees."

💡 Tip:Can be beneficial if you have a strong case, but increases risk if you lose.

Found a Term in Your Contract?

Upload your contract and get instant analysis of all risky clauses with negotiation scripts.

Analyze Your Contract →