Reading construction contracts: what to check before you sign

Most construction contracts aren't dangerous because of what they say — they're dangerous because of what they don't. A clause that's missing entirely often defaults to whichever party has more leverage, which is rarely the one signing at the bottom.

Payment terms

Check the actual number of days from invoice to payment, not just whether it says "standard terms" — that phrase means nothing on its own. 30 days from invoice is very different from 30 days from the end of the month the invoice was received in, which can add up to 60 days in practice. Also check whether interim payments are tied to a fixed schedule or to certified valuations, since the second gives the other party more room to delay.

Retention

Retention (typically 3-5% held back until practical completion, with a further release at the end of the defects period) is standard, but the release trigger matters more than the percentage. A contract that ties release to a vague condition — "to the client's satisfaction" — rather than a defined event or date gives the other party an indefinite excuse not to pay it.

Penalty and liquidated damages clauses

• Check the daily or weekly rate, and whether it's capped — an uncapped delay penalty on a long-running job is an open-ended liability.
• Check what counts as a delay caused by the other party (late information, late access, variations) — a fair contract excludes delays that weren't your fault; many don't say this explicitly and assume you'll argue it later.
• Check whether the penalty is a genuine pre-estimate of loss or clearly punitive — the latter is more likely to be challengeable, but only if you've noticed it before signing.

Liability and indemnity clauses

Uncapped liability clauses are the single highest-risk item in most contracts that get signed without being read closely, because the exposure has no relationship to the value of the job. Check whether liability is capped (and at what — contract value is common, but not universal) and whether it carves out your insurance limits.

What silence usually means

If a contract doesn't mention variations, retention release, or a dispute resolution process at all, that's not neutral — it usually means the other party's standard process applies by default, and you'll find out what that is the first time you need it. Missing sections are worth raising before signing, not after.