Top Clauses to Watch in Any Construction Contract (Before You Sign)

A construction contract is more than just a formality. It sets the legal framework for the entire project and defines what is expected from everyone involved. Whether you are a builder, subcontractor, property owner, or developer, reviewing the contract properly before signing is essential.

Some clauses carry more weight than others and can significantly impact how a project unfolds. Here are the key clauses you should carefully examine before agreeing to any construction contract.

Scope of Work

The scope of work outlines exactly what tasks will be completed, who will carry them out, and what materials and methods will be used. If this section is vague or incomplete, it can lead to major disputes later on. Make sure the details are specific and clearly reflect what you have agreed to. Any drawings, technical specifications, or supporting documents should be included and referred to in the contract.

Payment Terms

Payment clauses are among the most critical parts of any construction agreement. These terms should clearly state the total contract amount, the payment schedule, and the conditions under which payments will be made. It is important to check for anything that might delay or restrict payment, such as requirements for documentation or approval before invoices are paid. You should also understand what happens if payment is late or withheld.

Variations and Change Orders

Changes are common in construction. A clear process for handling variations to the work is essential. The contract should explain how changes are requested, approved, and costed. All variations should be agreed to in writing before the work is done. Without this, you may not be paid for additional work, or there may be confusion about responsibilities.

Delays and Extensions of Time

Delays can happen for many reasons, including bad weather, supply issues, or changes requested by the client. The contract should explain what qualifies as a legitimate delay, how to apply for an extension of time, and whether there are penalties for late completion. You should also check if the contract includes liquidated damages and how they are calculated.

Termination Clause

This clause outlines the conditions under which the contract can be ended early by either party. Some contracts allow termination for cause, such as breach of contract, while others include termination for convenience. You need to understand what notice is required and what payments or penalties apply if the contract is terminated. If you are entitled to payment for completed work or materials, this should be clearly stated.

Dispute Resolution

Disputes can occur, even in well-managed projects. A dispute resolution clause sets out how disagreements will be handled. Some contracts may require mediation or arbitration before legal action is taken. It is important to know where and how disputes will be resolved, especially if it involves travelling or high legal costs. Having a fair and clear process in place can help both parties resolve issues faster and with less stress.

Insurance and Liability

Construction involves risk, so insurance clauses are extremely important. The contract should specify what insurance each party must have, such as public liability, workers' compensation, and contract works insurance. You should also review any indemnity clauses, which can require one party to cover the other’s losses. These clauses should be reasonable and not overly one-sided.

A construction contract is a legally binding document that can protect your business, your time, and your money. Taking the time to read it properly and understand key clauses is not just a formality, it is good business practice.

If you are unsure about any terms or conditions, it is wise to get advice from a legal or construction industry professional. A careful review at the start of the project can prevent a great deal of trouble later on. In construction, clarity and preparation are just as important as the tools on site.