The Most Dangerous Provisions in a Commercial Subcontract

A construction subcontract is a minefield disguised as a business agreement. Buried within the standard terms and legal boilerplate are provisions designed to shift risk away from the general contractor and directly onto your shoulders. If you don’t know what to look for, you could be agreeing to work for free, pay for others’ mistakes, or risk your personal assets.

Based on the insights from Quit Getting Screwed by Karalynn Cromeens and decades of experience representing subcontractors, here are the most dangerous provisions hiding in your commercial subcontracts and provides practical strategies for protecting your business.

Why Subcontract Terms Matter More Than You Think

As the subcontractor, you are at the bottom of the construction contracting chain. The owner has the most leverage, followed by the general contractor, and finally the subcontractor. This power dynamic means general contractors draft subcontracts that protect their interests, not yours. They shift risk downward because they can.

Many general contractors present subcontracts as “standard” or “non-negotiable,” implying that all subs accept these terms without question, but this is rarely true. Experienced, sophisticated subcontractors negotiate contract terms regularly, and general contractors expect negotiation from knowledgeable subs.

1. The Scope of Work vs. Your Bid: The Blank Check Clause

The biggest shock for many subcontractors comes when they realize their bid is not part of the contract. In most agreements, the subcontract’s “Scope of Work” section—not your proposal—defines your obligations. If there are differences between the two, the contract controls.

Real-World Example

You’re a masonry subcontractor bidding on a commercial office building. Your detailed bid includes:

• Labor to install all CMU block per plans
• All mortar and installation materials
• Scaffolding and equipment
• Clean-up

Your bid specifically excludes:

• Steel lintels over openings (“by steel supplier”)
• Grout and rebar (“by others”)
• Waterproofing (“by others”)

Total bid: $285,000

The subcontract arrives with a Scope of Work section stating:

“Subcontractor shall furnish all labor, materials, equipment, and services necessary to complete all masonry work as shown on the plans and specifications, including but not limited to all work reasonably inferred or required to produce a complete and functional installation.”

The Problem:

Those “reasonably inferred” steel lintels cost $18,000. The “required for complete installation” grout and rebar cost $22,000. The waterproofing “necessary to complete the work” costs $9,000.

You’re now on the hook for $49,000 worth of work you never bid, turning your profitable job into a catastrophic loss.

Catch-All Phrase Traps

The “Including But Not Limited To” Trap

This phrase is a blank check. It means:

• The listed items are examples, not a complete list
• Additional items can be demanded as “reasonably inferred”
• The GC decides what’s “reasonably inferred”
• You have no recourse because you agreed to this language

The “As Shown on Plans” Problem

If the Scope of Work references “all work shown on plans and specifications,” you’re responsible for everything those documents show—even if:

• You never reviewed those specific plan sheets
• The items weren’t in your bid
• Industry practice treats those items as separate trades
• You based your bid on a preliminary drawing set

The Fix

Always review the Scope of Work as if you are bidding the project for the first time. In your contract negotiations, you can request to:

• Incorporate your bid by reference: add your bid and defined scope to the contract
• Add specific exclusions: add an “Exclusions” section listing everything you’re NOT providing within the contract price
• Define “reasonably inferred”: limit what is considered as reasonably inferred by value and scope before a change order is required
• Before signing the subcontract, compare it line-by-line with your original bid. If there are differences, send a formal request to revise the scope or adjust the price before signing.

2. Incorporation by Reference: Agreeing to Terms You Haven’t Read

Your subcontract likely states that you agree to the terms of the “Contract Documents.” This usually includes the Prime Contract between the owner and the general contractor. By signing, you are agreeing to terms, penalties, and schedules you haven’t even seen.

If the Prime Contract has a liquidated damages clause penalizing the general contractor $1,000 for every day the project is late, that penalty flows down to you. If you delay the project, you pay that fine.

The Fix

Never sign a subcontract without requesting and reviewing a copy of the Prime Contract. You cannot agree to rules you haven’t read.

When you get the Prime Contract, focus on these critical sections:

• Article on Subcontractors: How does it address subcontractor obligations?
• Schedule and Time Requirements: What are the deadlines and penalties?
• Quality and Specification Standards: What standards must you meet?
• Insurance and Bonding: What coverage is required?
• Changes and Extra Work: How are change orders handled?
• Warranties: How long must you warrant your work?
• Payment Terms: When does the owner pay the GC?
• Dispute Resolution: What happens if there are problems?

If the Prime Contract contains unfavorable terms, negotiate to limit what applies to you.

3. Pay-When-Paid Clauses: Forcing You to Finance the Project

The pay-when-paid clause makes the general contractor’s obligation to pay you contingent on them getting paid by the owner. It effectively forces you to finance the project. If the owner goes bankrupt or refuses to pay the GC for reasons unrelated to your work, you might never see a dime.

The Fix

While GCs rarely remove this clause entirely, you can negotiate a “stop-gap” to limit your risk. Some options include:

• Add a time cap: Ask for language stating that if the owner doesn’t pay within a certain timeframe (e.g., 90 days), the GC must pay you regardless.
• Limit to your work: If non-payment isn’t due to your specific work (e.g., the electrical work), the GC cannot withhold payment.
• Require diligent collection: Require that the contractor diligently pursue payment from the owner and provide regular status updates to you. The GC should also not settle any disputes that result in a reduction of your payment without your consent.
• Maintain lien rights: Ensure you can still file a lien if you’re not paid within a reasonable time.
• Request payment schedule: Understand the owner’s payment terms and history of payment. For example, if the owner pays quarterly or has a history of payment disputes, there’s a higher risk than with an owner who diligently pays monthly.

4. Termination for Convenience: Getting Fired for No Reason

This is arguably the most unfair clause in construction. It allows the general contractor to fire you at any time, for any reason—or no reason at all. They don’t have to prove you did bad work; they might just find someone cheaper.

If you have already ordered custom materials that can’t be returned, you could be left with the bill and no job.

The Fix

• Demand that this clause be removed: Simply strike the clause and initial the deletion. Many GCs will accept this, especially if you’re a specialty trade they need.
• Negotiate a termination fee: Include a clause that requires payment for work completed, non-returnable materials, mobilization and demobilization costs, and anticipated profit.
• Require a notice period: Ask for a notice period (e.g. 30 days) before termination. This will allow you to line up other work.
• Limit timing: Limit the right to terminate once a certain percentage of the project or contract price is completed.
• Make the cancellation option mutual: Allows you to walk away from the project if you find a better one or the relationship isn’t working.

5. No-Damages-for-Delay: Eating Costs You Didn’t Cause

If the project is delayed by the owner, the architect, or another subcontractor, this clause prevents you from recovering delay damages, or extra costs caused by the delay. Even if the delay forces you to demobilize, store materials, and remobilize months later—costing you thousands—you get nothing but an extension of time.

The Fix

Negotiate the following important exceptions:

• Exception for GC-caused delays: Exception for delays caused by the active interference or negligence of the general contractor
• Exception for extended delays: Sets a time limit (e.g. 30 days) between the delay damages that you absorb vs. what you can get compensated for.
• Cap uncompensated delays: Limits your exposure to a reasonable amount (ex. 20% of the contract price)
• Require acceleration payment: If they want you to work nights and weekends to make up for someone else’s delay, they pay for it.

6. Indemnification and “Duty to Defend”: Paying for Everyone’s Mistakes

Indemnity clauses require you to pay for losses or damages the GC incurs. The danger lies in “broad form” indemnity, where you might have to indemnify the GC even if the accident was partially their fault. If someone sues the general contractor, you might have to pay their legal bills and any settlement or judgment, even if you weren’t directly involved in causing the problem.

Even worse is the “duty to defend.” This requires you to pay the GC’s legal fees the moment a claim is filed, regardless of whether you are actually found liable later.

The Fix

To limit your indemnification obligation, you have a few options:

• Eliminate broad-form indemnity: Strike any language requiring you to indemnify the GC for their own negligence
• Make it proportional: You pay your fair share, not everyone else’s share.
• Remove “defend”: Strike the word “defend” from the clause, leaving only “indemnify and hold harmless.” This eliminates your duty to pay defense costs before fault is determined.
• Add an insurance condition: This caps your exposure at your insurance policy limits.
• Require additional insured status: Ensure the contract requires you to add the GC as an additional insured on your general liability policy. This shifts defense and indemnity costs to your insurance company rather than paying out of pocket.
• Mutual indemnity: Make the indemnity obligation mutual. If you have to indemnify them, they should have to indemnify you.

7. The Personal Guarantee: Risking Everything You Own

Buried in the fine print, often near the signature line, may be a Personal Guarantee. Signing this means you are personally liable for the company’s debts. If your business can’t finish the job or pay a supplier, the general contractor can come after your house, your car, and your personal bank accounts.

The Fix

Strike out the personal guarantee clause. If you are an incorporated entity (LLC or Inc.), you should rarely sign a personal guarantee for a construction contract. Your business assets should be the limit of your liability.

8. Prior Work Acceptance Clauses: Inheriting Other Trades’ Problems

This provision states that by starting your work, you accept all work performed by previous trades. If the concrete slab is uneven and your flooring cracks later, you are responsible because you “accepted” the slab by laying the floor.

The Fix

• Refuse to accept prior work: Strike the clause entirely.
• Limit to visible defects: You inspect the work and report any visible defects. If there are defects that are not discoverable through reasonable visual inspection, you are not liable.
• Require certification from prior trades: The contractor provides certification that the other trades’ work has been completed per plans and is suitable for the subcontractor to proceed.
• Document conditions: You document existing conditions before starting work. Any defects or concerns that you note are the contractor’s responsibility to address.
• Add time for inspection: Allows you time to inspect prior work before your scheduled start date.

Don’t Navigate the Minefield Alone

Every one of these provisions can be negotiated, but you have to spot them first. General contractors expect you to negotiate; accepting the first draft often signals that you don’t know the game.

The Cromeens Law Firm, PLLC, specializes in protecting subcontractors from these exact traps. We offer a flat-fee subcontract review with a 5-business day turnaround. We will review your contract, identify the specific risks effectively hiding in the fine print, and provide you with the language you need to protect your business.

Quit getting screwed. Contact us today to ensure your next contract is a fair one.

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FAQs

Should I always hire an attorney to review my subcontracts?

For significant projects (generally $50,000+), attorney review is highly recommended. The cost of review ($500-$1,500) is minimal insurance against the six-figure risks buried in dangerous contract provisions. For smaller projects, at minimum educate yourself on the 8 dangerous provisions discussed here and review contracts carefully yourself.

Will general contractors really negotiate contract terms, or are they non-negotiable?

Most general contractors will negotiate, especially with qualified subcontractors they want to work with. While they may present contracts as “standard” or “non-negotiable,” experienced subs successfully negotiate better terms regularly. The key is knowing what to ask for and being willing to walk away if necessary.

What if I’ve already signed a contract with dangerous provisions—can I still do anything?

Possibly. You might be able to negotiate an amendment to the contract if work hasn’t started or is in early stages. If disputes arise later, an attorney may find the dangerous provisions unenforceable under your state’s laws. However, it’s far better to address problems before signing than trying to fix them later.

Are pay-when-paid clauses legal in all states?

No. Some states (including California and North Carolina) have outlawed or significantly limited pay-when-paid and pay-if-paid clauses, especially on public projects. Other states enforce them. The legality and enforceability depend on: (1) your state’s specific laws, (2) whether it’s a public or private project, and (3) the exact contract language used.

If I refuse to sign a personal guarantee, will I lose the job?

Not necessarily. Many general contractors include personal guarantees in their standard forms but don’t insist on them, especially for established companies with track records. If you’re an LLC or corporation, you should generally refuse personal guarantees as a matter of policy. If the GC insists and won’t budge, you have to decide if the project is worth the risk to your personal assets.

How can I tell if an indemnification clause is “broad form” or “limited form”?

Look for language requiring you to indemnify the GC for their own negligence or for “any and all claims.” Broad-form indemnity includes language like “regardless of the negligence of Contractor” or “whether or not caused by Contractor.” Limited-form indemnity only requires you to indemnify for losses “caused by Subcontractor’s negligence” or “arising from Subcontractor’s acts or omissions.”