Construction Contract Review Checklist: What to Check Before You Sign

A construction contract is a risk allocation document. Every clause shifts risk for time, cost or quality between the parties. The time to understand that risk is before you sign - not when a dispute has already arisen. This checklist covers the clauses that most often cause problems.

1. Scope of works

Is the scope clearly and completely defined? Ambiguous scope is one of the most common sources of dispute. Check that the drawings, specifications and the contract are consistent, and that the order of precedence between documents is clear.

2. Payment terms

• When are progress claims made, and when are payments due?
• Does the payment regime align with the Security of Payment Act?
• Are there any “pay when paid” provisions (which are generally void under the Act)?
• What are the requirements for a valid payment claim?

3. Variations

How are variations priced, approved and documented? Many disputes arise from work carried out without a properly approved variation. Make sure the process is workable and that you will actually be paid for changes.

4. Time and extensions of time (EOT)

• What is the program and the date for practical completion?
• How are extensions of time claimed, and what are the notice requirements and time bars?
• What are the liquidated damages for delay, and are they a genuine estimate?

Time bars are unforgiving - a missed notice can defeat an otherwise valid EOT claim.

5. Defects and defects liability period

What are your obligations to rectify defects, and for how long? Check the defects liability period and the process for notifying and rectifying defects.

6. Security and retention

What security is required - bank guarantees, retention, or both? When and how is it released? Security provisions can tie up significant cash, so understand the triggers for recourse and return.

7. Insurance and indemnities

Check the required insurances and the breadth of any indemnities. Broad indemnities can expose you to liability well beyond your fault.

8. Termination and suspension

On what grounds can each party terminate or suspend? What are the consequences? Wrongful termination is a serious - and expensive - mistake.

9. Dispute resolution

What process applies if a dispute arises - negotiation, mediation, expert determination, arbitration or litigation? Is the process workable and appropriate to the project?

Don’t sign blind

Standard form contracts such as AS 4000 and AS 4902 are often heavily amended by special conditions, and those amendments are where the risk usually hides. A short review before signing can prevent a very expensive dispute later.

We review and draft construction contracts for builders, contractors, developers and homeowners. Learn more about our contract review and drafting service.