Key Construction Contract Provisions Every Subcontractor Should Know

A lot can go wrong when a contractor signs a subcontract without reading the fine print, and too many people don’t realize the risk until it’s too late. First Rule Contract Manager founder and co-CEO Eliot Wagonheim has seen firsthand the impact of dangerous contract provisions. In this episode, you’ll hear about:

• What flow down provisions can mean for your bottom line

• Why notice and indemnity matter more than you think

• How to handle pay when paid clauses and termination for convenience

This is a conversation for anyone working in commercial construction who wants real solutions. When you subscribe to our show, you help us grow. Someone you know may need to hear this story, so please share with your family and friends and consider supporting our mission.

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1. Dangerous Contract Provisions

• Takeaway: Commercial construction subcontracts frequently contain hazardous clauses—such as flow down provisions, indemnification, notice requirements, pay-when-paid clauses, and ambiguous project schedules. Understanding these provisions and their risks is crucial, as they often transfer unexpected liability and obligations to subcontractors, sometimes even referencing terms the subcontractor hasn’t seen.

2. The Importance of Negotiation and Risk Management

• Takeaway: Contractors cannot completely eliminate risk in construction contracts, but they can and should seek to negotiate terms to transfer, mitigate, or clarify risk. Effective negotiation is about knowing which risks must be accepted, which can be reduced, and how best to approach contract modifications in a practical way.

3. Contract Literacy and the Need for Education

• Takeaway: Most parties, especially subcontractors, often do not fully read or understand incorporated documents or legal jargon in commercial contracts, which is a costly mistake. The podcast underscores the value in educating construction professionals about contract terms, empowering them to make informed decisions and avoid costly disputes.

4. Evolution and Complexity of Construction Contracts

• Takeaway: Construction contracts have grown to be lengthy, complex, and lopsided—often favoring one party. This complexity is partly a result of legal habit, the need for risk allocation, and the lack of negotiation from subs historically. However, this complexity often undermines the true purpose of contracts: managing expectations and fostering successful project collaboration.

5. Leveraging Technology and AI for Contract Management

• Takeaway: Innovative tools like First Rule Contract Manager are emerging to help construction firms analyze, manage, and negotiate contracts more effectively. AI solutions trained specifically in construction law can provide risk assessments, institutionalize in-house knowledge, and streamline the contract review process, all while supporting—but not replacing—the role of attorneys.