8 clauses to check before you sign a subcontract
What each one looks like on the page, why it costs you, and what to ask for instead. Print it, keep it by the desk, or send it to whoever reads your contracts.
1.Pay-if-paid
- What it looks like
- Payment to you is "conditioned upon" or "subject to" the owner paying the GC, or the owner's payment is called a "condition precedent".
- Why it costs you
- If the owner never pays (a dispute, a default, a bankruptcy), you can finish the work and never be paid for it.
- What to ask for
- Payment within a set number of days of your pay application, and owner payment expressly not a condition precedent to yours.
2.Liquidated damages with no cap
- What it looks like
- A daily dollar amount for delay with no maximum and no exception for delays you didn't cause.
- Why it costs you
- On the 101-page subcontract in our showcase it is $2,500 a day. At an 11% margin, about 106 days of delay erases the profit on that job.
- What to ask for
- No damages for delays caused by others or excusable events, and a cap, for example 5% of your subcontract.
3.Scope you didn't price
- What it looks like
- Scope defined by reference to "all plans and specifications" or "everything necessary for a complete job", with your proposal's exclusions left out.
- Why it costs you
- Work you excluded in your bid becomes yours anyway, and you find out in the field.
- What to ask for
- Your proposal's exclusions attached and controlling, and any excluded work done only by written change order.
4.Broad-form indemnity
- What it looks like
- You "defend, indemnify and hold harmless" against all claims "arising out of" your work, regardless of who caused them.
- Why it costs you
- You can end up paying for losses the GC or owner caused. Many states limit this by statute, which often just starts a fight over how much.
- What to ask for
- Indemnity only to the extent caused by your negligence or those you're responsible for, never for another party's own negligence.
5.No damages for delay
- What it looks like
- Your only remedy for any delay is "an extension of time".
- Why it costs you
- When the GC or owner causes the delay (late access, out-of-sequence work, design changes), you carry the extra labor and overhead.
- What to ask for
- Time and money for delays caused by the GC, the owner, other trades, or anything within their control.
6.Short notice windows
- What it looks like
- A claim for extra time or money is waived unless written notice is given within 24, 48 or 72 hours of the event.
- Why it costs you
- The crew knows about the problem on day one; the office hears at the pay app. By then the claim may be gone.
- What to ask for
- Seven to fourteen days, email counting as written notice, and late notice barring a claim only if the other side was actually harmed by the delay.
7.Lien waivers in advance
- What it looks like
- An unconditional waiver of lien rights due with every pay application, sometimes covering work not yet paid for.
- Why it costs you
- You can give up your strongest payment remedy before the money arrives.
- What to ask for
- Waivers conditioned on, and effective only to the extent of, payments actually received, in your state's statutory form where one exists.
8.Termination for convenience
- What it looks like
- The GC may terminate "for any reason or no reason" and pay only for work installed.
- Why it costs you
- No overhead or profit on what you finished, and nothing for mobilization, demobilization or materials on order.
- What to ask for
- Payment for all work performed, with allocable overhead and profit, plus reasonable demobilization and close-out costs.
Have one on your desk right now?
Redline reads the whole subcontract in about three minutes and flags every one of these, quoted with the page and with the ask already drafted. Try it free for two weeks, up to three contracts, no card.
Run a contract freeGeneral information, not legal advice. Whether a clause is enforceable, and which fair version you can get, depends on the law where the project is built and on your contract as a whole. For anything with real money at stake, talk to a construction attorney licensed in that state.
