The Construction Contract Clauses That Could Cost You Everything

Construction contracts can look straightforward at first glance. They outline the work to be completed, the costs involved, and the deadlines. But hidden within the fine print are clauses that can dramatically shift the balance of power—and financial risk—between you and your contractor. These details are not always obvious, and overlooking them can leave property owners vulnerable to cost overruns, delays, or even legal battles.

While it’s tempting to skim through pages of legal language, those clauses exist for a reason. Some protect both parties, but others can be written to favor the contractor at your expense. Understanding the most dangerous clauses in construction contracts allows you to safeguard your property, your money, and your peace of mind.

Change Order Clauses

Change orders are inevitable in construction. Unforeseen issues, design adjustments, or material substitutions can alter the project scope. The danger lies in how the contract handles these changes. Some agreements allow contractors to impose changes without requiring owner approval, leaving you with unexpected costs.

A fair change order clause should require written consent from both parties before additional work begins. This ensures transparency and prevents contractors from billing you for tasks you never agreed to. Without this protection, you may find your budget stretched thin by charges you didn’t anticipate.

Delay and Extension Clauses

Delays are one of the most common issues in construction. Weather, supply shortages, or labor problems can cause setbacks. Contracts often include delay or extension clauses, but if worded vaguely, they can give contractors broad leeway to extend deadlines indefinitely. That means your project could drag on for months—or even years—without penalty.

To protect yourself, look for clauses that define what qualifies as a valid delay. Reasonable allowances should be made for extreme weather or supplier failures, but not for poor planning or mismanagement. You may also want provisions for financial penalties if delays exceed agreed-upon limits.

Termination for Convenience Clauses

Some contracts include a termination for convenience clause, which allows one party—often the contractor—to walk away from the project without cause. This can leave you scrambling mid-project to find a new builder, often at higher costs. Worse, you may have to pay the contractor for work not yet completed.

As a property owner, you should be wary of such clauses unless they apply equally to both parties. If termination for convenience is included, the contract should specify under what circumstances it can be used and how costs will be calculated. Otherwise, you risk being left stranded halfway through construction.

Indemnity Clauses

Indemnity clauses determine who is responsible if someone is injured or property is damaged during the project. Some contracts attempt to shift liability onto the property owner, even when the contractor is at fault. This could leave you facing lawsuits and insurance claims for accidents you didn’t cause.

A fair indemnity clause should protect both parties based on their respective responsibilities. Contractors should carry liability insurance to cover accidents caused by their work. Be cautious of language that tries to make you financially responsible for events outside of your control.

Payment Clauses

The way payment terms are structured can also expose you to unnecessary risks. Some contracts demand large upfront payments or tie disbursements to vague milestones. This creates situations where you’ve paid most of the money before significant work is completed, reducing your leverage if problems arise.

Safer contracts tie payments to clear milestones, such as completion of the foundation, framing, or final inspection. Always avoid agreements that require full payment before work is finished. Having structured payment clauses ensures accountability and protects your investment throughout the project.

Arbitration Clauses

Disputes are an unfortunate reality in construction. Many contracts require arbitration instead of litigation to resolve them. While arbitration can be faster and cheaper than going to court, some clauses unfairly favor the contractor by limiting your ability to challenge their claims.

Look closely at arbitration terms. They should allow both parties equal opportunity to present their case before a neutral arbitrator. Avoid contracts that restrict your rights or require arbitration in jurisdictions far from your property. A fair arbitration clause can be a useful tool, but an unfair one can strip you of essential legal protections.

Warranty Clauses

Warranty clauses define how long contractors are responsible for fixing defective work. Some contracts include minimal warranties or use vague language that limits your ability to enforce them. This leaves you with costly repairs if problems emerge after the contractor has moved on.

Insist on a written warranty that clearly specifies what is covered, how long the coverage lasts, and the process for filing claims. Warranties for structural work, roofing, and plumbing should last several years, not just a few months. Strong warranty clauses protect your property long after construction ends.

No-Damage-for-Delay Clauses

One particularly dangerous provision is the “no-damage-for-delay” clause. This language prevents you from seeking compensation if the contractor causes unnecessary delays. In effect, you could lose months and still be on the hook for full payment.

To avoid this, ensure the contract allows for liquidated damages or financial penalties if unreasonable delays occur. Without these protections, you bear the full cost of waiting while the contractor faces little to no accountability.

Final Thoughts: Protecting Yourself From Costly Clauses

Construction contracts are filled with clauses that may seem harmless but can carry serious consequences. From hidden change orders to unfair delay terms, these provisions often favor contractors and expose property owners to financial risk. The key is to read every clause carefully and negotiate terms that protect your interests.

When in doubt, seek professional legal advice. A construction attorney can spot problematic clauses and suggest fairer alternatives. By taking the time to understand and adjust your contract, you ensure your project runs smoothly—and that you don’t pay the price for overlooked fine print.