Contract Clause Library
Reference guide to risky contract clauses with discussion points you can customize and use.
Pay-If-Paid
Payment conditioned on owner payment to GC. You bear collection risk.
""Payment to Subcontractor is expressly conditioned upon receipt by Contractor of payment from Owner...""
""Payment shall be made within 30 days of approved invoice. Payment timing may be adjusted based on Owner payment but shall not exceed 45 days regardless of payment status from Owner.""
We request modifying this to a pay-when-paid clause with a 45-day outside date. This protects both parties while aligning with ConsensusDocs 750 standards.
Pay-When-Paid
Payment timing tied to owner payment, but not a condition precedent.
""Payment within 10 days of receipt of payment from Owner...""
""Payment within 30 days of receipt of payment from Owner, but in no event later than 60 days from approved invoice regardless of payment status from Owner.""
Please add an outside date of 60 days. This creates a reasonable backstop while respecting the payment flow.
High Retainage
Retainage above the 5% industry standard ties up your working capital.
""Contractor shall retain ten percent (10%) of each progress payment...""
""Contractor shall retain five percent (5%) of each progress payment. Retainage shall be reduced to 2.5% upon 50% completion of Subcontractor's scope.""
The 10% retainage exceeds industry standard. We request reducing to 5% with early release provisions.
Broad Form Indemnification
You may be liable for damages even when the GC is at fault.
""Subcontractor shall indemnify, defend, and hold harmless Contractor from ANY claims... regardless of whether caused by Contractor's negligence...""
""Subcontractor shall indemnify Contractor to the extent claims arise from Subcontractor's negligent acts or omissions, but not for claims arising from the negligence of Contractor or others.""
This broad form indemnification conflicts with [State] anti-indemnity statutes. Please modify to comparative fault indemnification per AIA A201.
Unlimited Liability
No cap on your potential liability exposure.
""Subcontractor shall be liable for all damages, costs, and expenses arising from the Work...""
""Subcontractor's total liability shall not exceed the Contract Sum, excluding claims covered by insurance.""
We request adding a liability cap equal to the contract value. This is standard practice for professional service agreements.
No-Damage-For-Delay
You waive the right to recover costs from GC-caused delays.
""Subcontractor waives all claims for damages for delays caused by any reason whatsoever...""
""Subcontractor waives claims for delay damages except for: (1) active interference by Contractor, (2) delays not contemplated by the parties, or (3) Contractor's breach of contract.""
We request adding standard exceptions to the no-damage-for-delay clause as permitted by courts in most jurisdictions.
Liquidated Damages Flow-Down
GC passes owner's liquidated damages to you without proportional allocation.
""Subcontractor shall be liable for all liquidated damages assessed against Contractor by Owner that are attributable to Subcontractor's Work...""
""Subcontractor's share of any liquidated damages shall be proportional to Subcontractor's contribution to the delay, as documented, and shall not exceed [specific cap].""
We request capping LD exposure and requiring proportional allocation based on documented delay contribution.
Extended Warranty
Warranty period exceeds the 1-year industry standard.
""Subcontractor warrants all Work for two (2) years from Final Completion of the Project...""
""Subcontractor warrants the Work for one (1) year from Subcontractor's substantial completion, or the manufacturer warranty period, whichever is longer.""
The extended warranty exceeds industry standard. We request aligning with AIA A201's one-year warranty from our substantial completion.
Unconditional Lien Waiver Before Payment
You waive lien rights before receiving cleared payment.
""Subcontractor shall provide an unconditional lien waiver for all work prior to receiving each progress payment...""
""Subcontractor shall provide conditional lien waivers with payment applications. Unconditional waivers shall be provided upon receipt of cleared funds.""
We will provide conditional waivers upon application and unconditional waivers upon receipt of cleared funds. This protects our statutory lien rights.
Strict Written Change Order Requirement
No compensation for verbal directives or constructive changes.
""No claim for extra work shall be valid unless authorized by a written change order signed by Contractor prior to commencement of such work...""
""Verbal directives for changes shall be confirmed in writing by Contractor within 3 business days. Constructive changes directed by field personnel shall be compensable upon Subcontractor's written notice.""
Please add a mechanism for confirming verbal directives in the field. This is essential for practical project management.
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