Red Flags to Watch for in Construction Contracts

Posted July 18, 2025 in Uncategorized

Legal Red Flags to Watch for in Commercial Construction Contracts

Our Denver, CO construction litigation lawyer knows that bad contract doesn’t fall apart on day one. It unravels halfway through a job—when the scope of work suddenly includes things you didn’t account for, or the payment you expected is still tied up behind someone else’s excuse. Construction contracts are supposed to keep projects moving. When they don’t, they cost you money, time, and sleep. Understanding the red flags that often get missed can help you protect your business.

With over 20 years of experience and a 10.0 Lawyer Rating on Justia.com, you can trust our attorneys to help you with your commercial construction contracts. Contact Volpe Law LLC today.

Scope of Work Is Unclear

If the contract doesn’t spell out exactly what’s being built, using what materials, and under what standards, exercise caution. Loose language like “industry standards” or “as needed” could invite the possibility of disputes. The scope should include clear deliverables, drawings, or performance metrics. If clients don’t know what they actually need, how can a business meet expectations?

Schedules That Don’t Match Reality

Deadlines that only look good on paper and have no mention of delays for permits, design changes, or material shortages show the timeline isn’t serious. Add in specific allowances for force majeure events, and balance any liquidated damages with reciprocal flexibility.

Conditional Payment Clauses

There are certain provisions in contracts that lead to litigation more frequently, and this is one of them. “Pay-when-paid” and “pay-if-paid” terms shift the risk of nonpayment downstream. If the owner stalls or defaults, subcontractors get stuck. Insist on unconditional payment language and firm deadlines so your payment doesn’t hinge on someone else’s situation.

Messy Change Order Processes

A handshake or verbal approval doesn’t hold water when a project runs over budget. If the contract doesn’t require written approvals for changes or doesn’t clarify who approves them, expect disputes. Lock in a formal process for submitting, reviewing, and approving changes, including pricing and timing.

Indemnity That Covers Everyone’s Mistakes

Some contracts bury broad indemnity clauses that make you responsible for everything short of a lightning strike. If you’re on the hook for design errors, third-party negligence, or site issues, that’s a red flag. Limit liability to your own work and your own mistakes.

Rigged Dispute Resolution

Contracts that force you into arbitration across the country or with pre-selected mediators stack the deck. Make sure the resolution process gives both sides a fair shot. Push for local venues and neutral decision-makers. Preserve your right to legal recourse when needed.

Owner Can Walk Anytime, No Consequences

“Termination for convenience” clauses let owners cancel without cause and without paying for your prep work or materials. That’s not fair or sustainable. Make sure there’s language requiring compensation for work done, supplies ordered, and costs to demobilize.

Insurance Terms That Don’t Fit the Job

Don’t assume your existing coverage will match what the contract requires. Some agreements call for sky-high limits or obscure endorsements. Review insurance and bonding terms early with your broker. If needed, negotiate adjustments that reflect the actual risk, not boilerplate overkill.

Hidden Risks Under Your Feet

Contracts that say you “accept the site as-is” can backfire fast. If there are unknown environmental hazards or subsurface issues, you shouldn’t be footing the bill alone. Request clear language allowing for adjustments if conditions differ from what was reasonably anticipated.

No Right to Stop Work

If the owner stops paying, and you keep working, your leverage disappears. Any clause that blocks your ability to suspend work for nonpayment puts your business at risk. Add a stop-work right that kicks in after a set period of nonpayment with proper notice. It protects your cash flow and your crew.

Catching Problems Before They Start

Contracts set the tone for the entire project. If the terms are off, the job won’t go right, even if the work is solid. Before you sign, it’s worth having an attorney take a hard look at what’s buried in the fine print.

At Volpe Law LLC, we help business owners, contractors, and developers across Colorado protect their projects before problems arise. Our attorneys have the experience and knowledge of the most recent laws and regulations necessary to help you with your business matter. Whether it’s reviewing terms or backing you up when things go sideways, we’re here to make sure you don’t go it alone. Call us at 720-770-3457.