Four Construction Contract Red Flags Every General Contractor Should Catch Before Signing
Before you sign a prime contract, it’s worth slowing down and taking a hard look at where risk may be quietly shifting onto your company. Many contract provisions look “standard,” but in practice they can transfer significant financial exposure to you—the General Contractor—often without a corresponding increase in compensation.
Below are four contract clauses that routinely create problems for GCs. Spotting them early—and addressing them before signing—can make the difference between a profitable project and one that drains your margin.
1. No‑Damages‑for‑Delay Clauses
What this clause does
A no‑damages‑for‑delay clause limits your remedy for project delays to extra time only. Even if the delay is caused by the owner, the designer, or another trade, you waive the right to recover additional compensation.
Why this matters to you
Delays cost real money. Extended general conditions, idle crews, equipment standby, acceleration costs, and labor or material price increases all come out of your pocket. With this clause in place, you absorb those costs—even when the delay isn’t your fault.
What to push for
Ideally, negotiate this clause out entirely. If that’s not realistic, push for meaningful carve‑outs that allow compensation when delays result from the owner’s active interference, negligence, or bad faith. Without exceptions, you’re effectively financing other people’s mistakes.
2. Broad‑Form Indemnification (“Hold Harmless”) Provisions
What this clause does
Broad‑form indemnity requires you to defend and indemnify the owner (or another party) even when a claim arises from that party’s sole negligence.
Why this matters to you
This is one of the most dangerous clauses a GC can agree to. Liability for another party’s sole negligence is typically not covered by insurance. If a serious claim arises, you could be facing six‑ or seven‑figure exposure with no coverage backing you up.
What to push for
As a rule, you should not agree to indemnify another party for their own negligence. At a minimum, the clause should be limited to losses caused by your own negligent acts or omissions, or structured around comparative fault. Anything broader is a serious risk to your business.
3. Excessive Liquidated Damages
What this clause does
Liquidated damages (LDs) set a daily dollar amount for missing the contract completion date. They become a red flag when the number is high and not tied to the owner’s actual anticipated losses.
Why this matters to you
High LDs can turn a relatively short delay into a major financial hit—especially on projects with tight margins. While courts may refuse to enforce LDs that function as penalties, fighting that battle after the fact is expensive and uncertain.
What to push for
Ask whether the LD amount reasonably reflects the owner’s likely damages, such as lost rent or lost production. If the number feels punitive, negotiate it down before signing. Once the contract is executed, your leverage disappears.
4. Differing Site Conditions—and Disclaimers
What this clause does
Some contracts fail to include a fair differing site conditions clause. Others go further and disclaim reliance on owner‑provided geotechnical reports or site information.
Why this matters to you
Unforeseen subsurface conditions—rock, unsuitable soils, buried debris—can blow up both your schedule and your budget. If the contract pushes all site risk onto you, you’re responsible for conditions you couldn’t reasonably price into your bid.
What to push for
Insist on a clear differing site conditions provision that allows for equitable adjustments to both time and money. The clause should also set reasonable notice requirements and avoid broad disclaimers that shift all subsurface risk to you.
Bottom Line for General Contractors
If a clause is described as “standard,” that doesn’t mean it’s harmless. Many of these provisions are specifically designed to move risk downstream—onto the General Contractor—where it can quietly erode profit or create catastrophic exposure.
Reviewing these issues before signing gives you leverage. Addressing them after a problem arises is far more difficult and costly.
If you want to review with a professional, reach out to our team at Risk Averse Insurance in Delaware County, PA.
