How to read a construction contract before you sign

A construction contract is where a good working relationship gets protected or a bad one gets quietly baked in. Most owners read it once, understand about half of it, and sign because the project is already late.

You do not need to be a lawyer to read one usefully. A handful of clauses carry nearly all the risk, and knowing what good looks like in each is enough to spot the ones worth pushing back on.

This is the clause that causes the most disputes, and the test for it is simple: could a stranger read this and know exactly what is included — and, more importantly, what is not?

Good scope references the drawing set by number and revision, describes the work room by room or trade by trade, and states its exclusions explicitly. Vague scope — 'renovate the kitchen', 'all necessary works' — is not shorthand for generosity. It is the thing that makes a change order arguable in six months.

Exclusions deserve as much attention as inclusions. Appliances, light fittings, window treatments, landscaping and permit fees are the ones most commonly left out, and it is much better to find that in the contract than in an invoice.

Know exactly which model you are signing. A fixed price means the contractor carries the risk on their own scope. Cost-plus means you pay actual costs plus a fee, and you carry that risk. Cost-plus with a guaranteed maximum sits in between, and the detail worth reading there is what happens to any saving under the cap.

Payments should be tied to completed, verifiable milestones rather than to dates on a calendar. A payment schedule that runs on the calendar pays for time rather than progress, which is exactly backwards if the job slows down.

Watch the front end. A large deposit before any work — well beyond what mobilisation and material orders genuinely require — is the single most common warning sign in residential construction.

The contract should say how a change gets priced, who approves it, and that no change proceeds without written approval. That last part protects both sides: it stops surprise invoices, and it also stops a contractor doing work on a verbal instruction that later gets disputed.

Look for whether the change-order clause includes schedule impact as well as cost. Many do not, which means a change can be approved on price and quietly add three weeks nobody agreed to.

A contract should carry a start date, a completion date, and a definition of what counts as an excusable delay — weather, a change you requested, an agency review taking longer than the norm. Vagueness here means every delay becomes a negotiation.

Be realistic about remedies. Liquidated damages are common in commercial contracts and rare in residential ones, and a domestic contractor who accepts an aggressive damages clause may simply be pricing the risk into the number. What matters more day to day is that the schedule exists, is specific, and gets reported against.

Get the workmanship warranty spelled out in the contract itself — its length, what it covers, and how a claim is made — rather than promised verbally and omitted from the paperwork. Manufactured goods carry their own manufacturer warranties, and the contract should say those get handed over at completion.

Confirm insurance: general liability, workers' compensation, and that certificates name the right parties. In a co-op or condo, the building will have its own requirements, and they are usually stricter than yours.

Finally, lien waivers. Each payment should be accompanied by waivers from the trades it covers. Without them you can pay your contractor in full and still face a lien from a subcontractor who was not paid.

Ambiguity in a contract is almost never accidental, and it always benefits whoever drafted it. Phrases like 'as required', 'industry standard', 'to be determined' and 'allowance' should each prompt a question — not because they are always wrong, but because each one is a decision that has not been made yet.

Allowances in particular deserve scrutiny. An allowance is a placeholder for something not yet chosen, and an unrealistically low one makes a bid look competitive while guaranteeing an increase later. Ask what the allowance actually buys.