(Part 2 of a 2-Part Series on Contract Clauses That Can Make or Break Your Business)

Here’s the truth: most contractors skim contracts. They focus on price and schedule and hope for the best. But the ones who win long-term? They’re the ones who know where the traps are hidden.

Last week in Part I, we covered the four basics you need to get right: pricing method, scope and exclusions, payment terms, and change orders. Those protect your day-to-day cash flow.

Today we’ll cover four more watch-outs — the hidden clauses that don’t show up on every job but can quietly shift thousands of dollars of risk onto your shoulders. Get these right, and you’ll separate yourself from competitors who learn these lessons the hard way.

1. Delays (Weather, Permits, and Owner Decisions)

What to check for: Every contract sets a completion date. If you don’t finish on time, the owner may charge liquidated damages (like $1,000/day). That’s where delay clauses get teeth. To protect yourself, the contract should spell out which delays give you extra time without penalty.

Weather: Define it clearly. Don’t just say “weather delays.” Spell it out: “A weather day occurs when rainfall exceeds 0.25 inches, winds exceed 25 mph, or temperatures fall below 20°F during working hours.” Keep daily logs to back it up.
Permits: Permits that used to take two weeks can now take two months. Your contract should give you schedule extensions when approvals drag.
Owner decisions: Owners cause delays too — late approvals, slow site access, indecision. Protect yourself with language like: “Contractor is entitled to time extensions for delays caused by Owner actions or failures to provide timely information.”

How it goes wrong: I’ve seen contractors hit with $1,000/day penalties because their contract defined “weather delay” so narrowly that normal rain days didn’t count. They ended up paying for time they couldn’t control.

Your takeaway: Make sure your contract gives you schedule extensions for things outside your control. Contractors who get this right avoid penalties and can bid jobs with more confidence.

Contractor’s Risk Playbook

Get the playbook we use with clients: how to handle delays, termination, liens, and indemnity before they sink your next job.

2. Termination Clauses (When a Job Gets Pulled)

What to check for: Contracts can end early in three different ways, and each needs protection spelled out.

Termination for convenience: Owner cancels even though you did nothing wrong. You should be paid for work completed, materials on site, and demobilization costs.
Termination for cause (your fault): If you truly default, you may owe replacement costs — but you should still be paid for properly performed work.
Termination for owner default: If they stop paying, you should have the right to suspend work, recover damages, and walk without penalty.

How it goes wrong: I know a GC who was 70% done when the owner “changed direction.” Because the contract didn’t guarantee demobilization costs, he ate $40,000 in equipment moves and material returns.

Your takeaway: Spell out exactly what happens in each termination scenario. That clarity keeps you from losing money when projects go sideways — and makes you the contractor owners trust to keep things professional.

3. Lien Rights & Payment Protection

What to check for: A mechanics lien is your strongest leverage if you’re not paid — but contracts often try to limit or waive it.

No advance waivers: Watch for “no-lien” clauses or anything that says “Contractor waives lien rights.” In some states, those are enforceable.
Deadlines: Most states require preliminary notices and filings within strict timeframes (often 20–120 days). Miss a deadline and you lose your rights entirely.
Lien leverage: A properly filed lien means owners can’t sell or refinance until you’re paid. That pressure is often what gets the check cut.

How it goes wrong: I’ve seen contractors miss a lien notice deadline by just a few days — and lose all rights to collect $75,000 in unpaid work. With no lien leverage, they were stuck chasing money in court for years.

Your takeaway: Don’t sign away lien rights before work starts, and know your deadlines cold. Contractors who preserve their lien leverage get paid faster and spend less time chasing money.

4. Indemnification & Insurance (Who Covers What)

What to check for: Indemnification is legalese for “who pays when something goes wrong.” Insurance clauses then spell out what coverage you need.

Indemnification: One-sided clauses can make you pay for everyone’s mistakes. Push for limits: you should only indemnify “to the extent caused by your own work or negligence.”
Insurance requirements: Standard coverage — general liability ($1–2M), workers’ comp — is fair. Watch for excessive requirements that don’t match the project.
Third-party errors: Make sure you’re not on the hook for design flaws, code errors, or the owner’s mistakes. Mutual indemnification is better, but the real win is limiting liability to your own work.

How it goes wrong: I’ve seen contracts that made GCs liable for the architect’s design errors. When the foundation failed, the GC paid $200,000 for work he didn’t cause.

Your takeaway: Limit indemnity to your own negligence and negotiate insurance requirements that match the job. That keeps your risk manageable and your bids competitive.

Closing

Contracts aren’t about trust — they’re about clarity. The four basics we covered in Part I protect your day-to-day cash flow. These four watch-outs protect you from the hidden landmines that can sink your business completely.

Before you sign your next contract, take 30 minutes to run through both checklists: the basics and the watch-outs. While competitors skim and hope for the best, you’ll be building real protection into every job.

At Dragonfly Insurance, we work with contractors every day who’ve learned these lessons the hard way. We help match your insurance program to your actual contract risks, so you’re covered without overpaying. Reach out anytime - we’re here to help.

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Four More Contract Watch-Outs That Can Sink Your Business