How to Review a Construction Contract Before You Sign

Why You Need to Read Every Page

Most contractors skim a contract looking for the price and the start date. Everything else gets signed without a second look. That's how you end up doing extra work for free, waiting 90 days for payment, or eating the cost of someone else's mistake.

This guide walks through each section of a typical construction contract and tells you exactly what to look for — in plain English.

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Step 1: Scope of Work

This is the single most important section. It defines what you're agreeing to do — and just as importantly, what you're NOT agreeing to do.

What to look for:

• Specific deliverables, not vague descriptions ("Install 200 LF of 8-inch ductwork" vs. "HVAC work as needed")
• References to drawings, specs, or exhibits — and whether you actually have copies of those documents
• Exclusions — anything you're explicitly NOT responsible for

Red flag: If the scope says "all work necessary to complete" without detailed specs, you could be on the hook for anything the GC decides to add later.

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Step 2: Payment Terms

This tells you how much you'll get paid, when, and under what conditions.

What to look for:

• Payment schedule — is it milestone-based, monthly, or on completion?
• Retainage — how much is withheld, and when is it released?
• Pay-when-paid or pay-if-paid language (see our separate article on this — it matters enormously)
• How long after invoice submission does the GC have to pay? 30 days is standard; 60-90 is a cash flow killer

Red flag: No specific payment timeline, or language that says payment is "contingent upon" the GC getting paid by the owner.

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Step 3: Change Orders

Extra work happens on every job. This section determines whether you get paid for it.

What to look for:

• Is there a written change order process?
• Can you be directed to do extra work verbally, or does it require a signed document?
• What happens if you do extra work without a formal change order? Some contracts say you forfeit payment for unauthorized extras

Red flag: "No additional compensation shall be paid unless a written change order is executed prior to the commencement of additional work." This means if the GC tells you to do something extra on a Friday afternoon, and you do it, you might not get paid.

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Step 4: Insurance Requirements

Every contract specifies insurance you need to carry. Make sure you can actually meet these requirements before signing.

What to look for:

• General liability limits (commonly $1M per occurrence / $2M aggregate)
• Auto liability coverage
• Workers' compensation requirements
• Whether you need to name the GC and/or owner as additional insured
• Professional liability (E&O) if applicable

Red flag: Requirements that exceed what's standard for your trade, or insurance types you don't currently carry that would be expensive to add.

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Step 5: Indemnification

This section says who's responsible when something goes wrong. It can make you liable for things that aren't your fault.

What to look for:

• Are you only indemnifying the GC for your own negligence, or also for theirs?
• Does the indemnification extend to the owner, architect, and "all related parties"?
• Is it a "broad form" indemnification (you cover everything) or "comparative fault" (you only cover your share)?

Red flag: Language that says you indemnify the GC "regardless of whether caused in part by the GC's own negligence." Several states have outlawed broad-form indemnity clauses, but they still show up in contracts.

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Step 6: Termination Clauses

This covers how either party can end the contract, and what happens when they do.

What to look for:

• Can the GC terminate for convenience (no reason needed)?
• If terminated for convenience, do you get paid for work completed plus reasonable profit on uncompleted work?
• How much notice is required?
• What counts as cause for termination?

Red flag: The GC can terminate for convenience with only 24 hours' notice and you only get paid for "work accepted by Owner." That means completed work the GC hasn't inspected yet might not count.

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Step 7: Dispute Resolution

When a disagreement escalates, this section determines how it gets resolved.

What to look for:

• Mediation, arbitration, or litigation?
• Where will disputes be heard? (Venue/jurisdiction)
• Who pays the costs?
• Is there a mandatory claims process before you can pursue a dispute?

Red flag: Mandatory arbitration in a distant city with the losing party paying all costs. This is designed to make it too expensive for you to fight, even if you're right.

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Step 8: Warranty and Defective Work

This defines your obligations after the job is done.

What to look for:

• Warranty period (1 year is standard)
• What counts as "defective" — objective standards or the GC's subjective judgment?
• Who pays for access to warranty items (tearing out drywall to reach a pipe, etc.)?
• Does the warranty period restart on warranty repairs?

Red flag: Unlimited warranty duration, or language that says "Contractor shall correct any defective work at Contractor's sole cost for the life of the project."

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The Bottom Line

Reading a contract takes time, but signing one you don't understand can cost you the job. Every section above has real financial consequences — and the contract is your only protection when things go sideways.

If you want a faster way to review your contract, upload it to ContractDoctors. Our AI reads through every section, flags the risks, identifies missing protections, and gives you specific language to negotiate — all in plain English, built for contractors who need answers before they sign.