Construction & Subcontractor Contract Risk Scoring
Construction contracts are high-dollar, and the most damaging terms shift the risk of someone else's nonpayment or fault downstream — or strip your ability to claim for delay and changes. LiabilityScore™ reads the agreement and flags pay-if-paid risk shifts, one-sided indemnity, advance lien waivers, retainage traps, and the absent protections (a right to suspend for non-payment, a defined change-order process) that leave you exposed.
What We Analyze
- Pay-if-paid vs. pay-when-paid payment timing
- Right to suspend or terminate for non-payment
- Liquidated delay damages and no-damages-for-delay clauses
- Retainage percentage and release timing
- Indemnity scope (including the other party's own negligence)
- Lien-waiver timing (conditional vs. unconditional / advance)
- Change-order pricing process and 'proceed under protest'
- Flow-down to an unseen prime contract
- Differing / unknown site conditions
- Consequential-damages waiver and dispute venue
Common Red Flags in Construction Contracts
'Pay-if-paid' payment
Making your payment a condition precedent that depends on the owner paying the general contractor shifts the risk of the owner's nonpayment onto you — you can perform fully and still not be paid.
'No-damages-for-delay'
A clause barring delay claims entirely, leaving an extension of time as your only remedy, means owner-caused or excusable delays land on you with no compensation.
Broad indemnity covering the other party's own negligence
An indemnity that reaches the indemnitee's own negligence, with a duty to defend triggered on mere allegation, shifts liability for harm you did not cause. Negotiated versions limit indemnity to your own fault (comparative).
Unconditional advance lien waiver
A required lien waiver given unconditionally and in advance — 'whether or not paid' — can strip your security before you have actually been paid.
Uncapped liquidated delay damages
Per-day delay damages with no cap and no extension for excusable delay can exceed the value of your work. Negotiated versions cap them, make them mutual, and allow time extensions.
What a Low-Risk Construction Contract Looks Like
- Pay-when-paid timing with an outside payment date, not a pay-if-paid risk shift
- A preserved right to suspend work for non-payment
- Liquidated delay damages capped and mutual, with time extensions for excusable delay
- Retainage at or below 10%, reduced at substantial completion and released by scope
- Comparative indemnity limited to the indemnitor's own fault
- Conditional or progress lien waivers tied to actual payment received
- A defined change-order pricing process before changed work proceeds
Frequently Asked Questions
What is pay-if-paid vs. pay-when-paid?
'Pay-if-paid' makes payment to a subcontractor a condition precedent that depends on the owner paying up the chain, shifting nonpayment risk downstream. 'Pay-when-paid' addresses only timing and, when it includes an outside date, still requires payment within a reasonable period.
What is a no-damages-for-delay clause?
It bars a contractor's claim for the cost of delay, leaving an extension of time as the only remedy — even when the delay was caused by the owner. Negotiated versions preserve delay claims for excusable or owner-caused delay.
What is retainage?
Retainage is a percentage of each payment withheld until the work is complete. Negotiated agreements commonly keep it at or below 10%, reduce it at substantial completion, and release it by completed scope rather than only after the whole project finishes.
What is a flow-down clause?
A flow-down clause binds a downstream party to the terms of a prime contract higher up the chain. When the prime contract is not provided, you can be bound to obligations you have not seen.
What is a lien waiver?
A lien waiver gives up the right to place a mechanic's lien for unpaid work. Negotiated agreements use conditional or progress waivers tied to actual payment, rather than unconditional waivers given in advance.
Is LiabilityScore™ legal advice?
No. LiabilityScore™ provides contract analysis and educational information. Reports describe what the contract says and identify clauses commonly modified in negotiated versions of similar contracts. LiabilityScore™ does not provide legal advice and does not recommend any particular action regarding your specific contract — the legal judgment is yours. For advice specific to your situation, especially for high-stakes agreements, consult a licensed attorney.
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