Five Things to Check Before You Sign a Construction Contract

Construction contracts are long. They're written by lawyers, often on behalf of whoever has the most leverage in the transaction. Reading one cover-to-cover before signing is not realistic for most people — but there are five areas that account for the majority of disputes, and they're worth understanding before you commit.

1. Variations: who can authorise them?

Every contract has a variation clause. The question is whether your variation process requires written authorisation before work starts, or whether verbal instructions from the site supervisor are treated as approved variations. The second scenario is where cost blowouts happen.

Look for language that requires written direction from a nominated representative before any variation work is carried out. If that's absent or vague, add it.

2. Liquidated damages

If the project runs late, what is the contractor's financial exposure? Many standard contracts include liquidated damages clauses — but the amounts are often nominal, and the triggering conditions can be complex.

Understand what the delay threshold is, what extensions of time the contractor can claim, and whether the LD rate is actually material to your project.

3. Practical completion vs. final completion

These are different things. Practical completion is typically when the building is fit for occupation, with only minor defects outstanding. Final completion is when the defects liability period has ended.

Your retention sum — if there is one — is often tied to these milestones. Know when you're entitled to release it, and when you're not.

4. Head contract vs. subcontract alignment

If you're a head contractor engaging subcontractors under a separate contract, check that your subcontract terms flow down from the head contract. Programme obligations, variation clauses, and payment terms that don't align between the two contracts create gaps that subcontractors will find.

5. Insurance: what's required and who holds it

The contract will specify minimum insurance requirements. Verify that the contractor holds them before work starts — not after. This includes public liability, workers compensation, and contract works insurance.

A certificate of currency from the broker is not the same as current coverage. Check the policy expiry dates.

We review construction contracts as a standalone service — fixed fee, written feedback, no retainer required. Contact us to discuss your project.