Written for general contractors, remodelers, framers and carpenters, roofers, drywall, masonry and concrete contractors, and kitchen and bath installers in the US, from one-truck outfits to small GCs.
The short version
- Get the prime terms and check the state.Flow-down clauses can bind you to prime contract terms you have not seen. The same wording can be void in California and enforceable in Florida.
- Strike broad indemnity and advance lien waivers.Narrow indemnity for the GC's own negligence, give conditional waivers tied to payment received, and test pay-if-paid against state law.
- Check your policy against the insurance clause.A COI does not change your policy. If the policy lacks the endorsements the subcontract requires, you are in breach.
A subcontract can move a lot of the owner's risk down to you. Many of the clauses that cost subs money are treated differently state by state, so the same wording can be void in California and enforceable in Florida. Read it with the state in mind before you sign.
Pay-if-paid and pay-when-paid
Pay-if-paid shifts the risk of the owner not paying onto you; pay-when-paid only sets timing, with payment due within a reasonable time. California and New York treat pay-if-paid as void. Florida enforces it only if it clearly shifts the owner's credit risk, and otherwise reads it as pay-when-paid. In Texas, chapter 56 of the Business and Commerce Code controls contingent payment, including notice-of-objection and contractor-fault limits. As of Oct 2026.
Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal.4th 882; West-Fair Elec. Contractors v. Aetna Cas. and Sur. Co. (1995) 87 N.Y.2d 148; DEC Electric v. Raphael Construction, 558 So. 2d 427 (Fla. 1990); Tex. Bus. and Com. Code ch. 56
Clauses to strike or narrow
- Advance lien waivers or no-lien clauses: void in New York, and the statutory forms control in California, Texas and Florida. Give conditional waivers tied to payment received.
- Indemnity for the GC's own negligence: limited by statute in California, Texas, New York and Florida. Strike or narrow broad-form clauses, and have counsel in the state review them.
- No-damages-for-delay and short claim notices: calendar the deadlines and record delays daily.
- Retainage held until the whole project is done: ask for release when your scope is complete, and check the state limits.
- Flow-down from a prime contract you have not seen: get the prime terms before you sign.
- A warranty that starts at project completion: tie it to your own substantial completion.
- Out-of-state venue or law: void or voidable for in-state work in California, Texas, Florida and New York.
- Uncapped liquidated damages, or no extensions for owner delay, weather or permits: ask for a cap and those extensions.
A COI does not change the policy, and a mismatch between your policy and the subcontract breaches the subcontract.
Prompt payment and retainage, by state
Texas: the owner pays within 35 days of the contractor's request, the contractor pays a sub within 7 days of receiving payment, and unpaid sums carry interest of 1.5% a month. California: subs are paid within 7 days of receiving a progress payment, with a 2% monthly late-payment penalty, and on private contracts entered on or after January 1, 2026 retainage is generally capped at 5% of each payment and of the contract price, excluding non-mixed-use residential projects of 4 stories or fewer. New York: on private projects with an aggregate cost of at least $150,000 (most small residential work is excluded), retainage is capped at 5% and payment downstream is due 7 days after good funds and the required documents. As of Oct 2026.
Tex. Prop. Code ch. 28; Cal. Bus. and Prof. Code sec. 7108.5; Cal. Civ. Code sec. 8811; N.Y. Gen. Bus. Law art. 35-E
Changes and claims
Price and sign every change order before the work: number, date, who requested it, the description, the cost and the schedule effect in days. Claims for delay or extra cost often need written notice within 7 to 21 days of the event, and AIA A201 sec. 15.1.3 gives 21 days, so calendar the deadline the day the event happens.
A homeowner contract carries its own rules: missing home improvement notices, cancellation rights or deposit limits can lead to a late cancellation or nonpayment. Check your state's requirements before you use a template.
Asked in Greymill
Pay-if-paid: void in California, so it cannot shift the risk of the owner not paying onto you.
Advance lien waiver: California's statutory waiver forms control. Strike it, and give conditional waivers tied to payment received.
Covering their own negligence (indemnity): limited by statute in California. Strike or narrow it, and have a California attorney review the wording.
Now the insurance. A COI does not change your policy. Before you sign, check the policy carries the additional insured endorsements for ongoing and completed operations (CG 20 10 and CG 20 37). A mismatch breaches the subcontract.
Ask too for the prime contract terms (the GC's contract with the owner) that flow down to you. Next, I can mark up these clauses with replacement wording.
Ask it about your own business
Paste this into Greymill with your own figures, and Contracts & Disputes works it through for your business.
I run a construction or building business in [state], in the US. A GC has sent me a subcontract for [describe the scope] worth [amount] on a [private or public, residential or commercial] project. [Paste the payment, retainage, lien waiver, indemnity, insurance, delay, warranty and venue clauses.] Tell me which clauses are void or limited in my state, which to strike or narrow, and what to ask for instead.
More for construction and building in the US
- Pricing labor when the wage is only part of what a carpenter costs meWork out the burdened cost of each productive hour, then price for margin, not markup.Read the lesson
- Profitable on paper, but payroll is due before the pay app clearsPayroll goes out weekly while pay apps take 30 to 60 days and retainage waits for completion. A weekly forecast and an honest WIP schedule keep the gap in view.Read the lesson
- Not knowing who owes sales tax on the materials and labor in my contractsWhether you pay tax on materials or collect it from the customer depends on the state, the type of work and how the contract is written.Read the lesson
- Starting a job without the license, permits and notices my state requiresLicensing is set by the state and the city, home improvement contracts carry their own notices, and OSHA's construction rules apply on every site.Read the lesson
- Paying my crew as 1099 subs when they work like employeesIn California an unlicensed sub doing licensed work is presumed to be an employee, and at the comp audit an uninsured sub's pay is usually added to your own payroll and charged premium.Read the lesson
- Getting prequalified with GCs and public owners instead of chasing platform leadsHomeowners check reviews and your license, GCs check your financials, bonding and safety record, and public owners check registration and bonds.Read the lesson
- The GC is late paying and I am not sure I still have lien rightsLien rights can be lost in the first weeks of a job with a missed preliminary notice, so check your notices and deadlines before you chase the money.Read the lesson
Open the interactive lesson · Every construction and building lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- DEC Electric v. Raphael Construction, 558 So. 2d 427 (Fla. 1990) (Contracts, pay-if-paid, prompt payment, retainage and bonds)
- secs. 28.002, 28.004 (Contracts, pay-if-paid, prompt payment, retainage and bonds)
- sec. 7108.5 (Contracts, pay-if-paid, prompt payment, retainage and bonds)
- secs. 8812, 8814, 8818 (Contracts, pay-if-paid, prompt payment, retainage and bonds)
- Cal. Civ. Code sec.8811(a), (b)(1) to (3) (Contracts, pay-if-paid, prompt payment, retainage and bonds)
- Pub. Cont. Code sec. 7201(b)(1), (b)(2) (Contracts, pay-if-paid, prompt payment, retainage and bonds)
- Lien Law sec. 34 (Contract red flags)
- see the contracts section sources (Contract red flags)
- Cal. Civ. Code sec.2782; Tex. Ins. Code ch.151; N.Y. Gen. Oblig. Law sec.5-322.1; Fla. Stat. sec.725.06 (Contract red flags)
- ISO forms (industry standard; licensed) (Insurance and risk)
- N.Y. Labor Law sec.240(1) (Insurance and risk)
- Ins. Code sec. 151.104 (Insurance and risk)
- California contractor bond amount under Bus. and Prof. Code sec.7071.6 (Insurance and risk)
- Insurance Guidelines, occurrence versus claims-made discussion; 11 NYCRR sec.73.1(a), (d) ERP definitions (Insurance and risk)
- What is new; reporting threshold (Pitfalls that embarrass the product)
- Bus. and Prof. Code sec.7048(a) to (c) (Pitfalls that embarrass the product)
- Bus. and Prof. Code sec.7125; CSLB Bulletin 22-12 (Oct.11,2022), four additional classifications from Jan.1,2023 and pre-existing C-39 duty (Pitfalls that embarrass the product)
- Bus. and Com. Code ch. 56 (Pitfalls that embarrass the product)
- Termination table, Q1 and Q7; IRC sec.25D(e)(8) (Pitfalls that embarrass the product)
- Notice 2026-11 secs.2.02(1), 3.03, 3.06 and 3.07 (Pitfalls that embarrass the product)
- Civ. Code sec. 8204; Fla. Stat. sec. 713.06(2)(a); Tex. Prop. Code sec. 53.056 (Who must sign off: time-critical steps first)
- see "MECHANICS LIENS: THE FOUR-STATE NOTICE AND FILING MATRIX" sources (Who must sign off: time-critical steps first)
- sec. 27.004(a), (b) (Who must sign off: time-critical steps first)
- sec. 558.004(5) (Who must sign off: time-critical steps first)
- 29 C.F.R. sec. 1904.39(a) (Who must sign off: time-critical steps first)
- A201-2017 sec. 15.1.3 (Who must sign off: time-critical steps first)
- Bus. and Prof. Code sec. 7030.5; Fla. Stat. sec. 489.119(5)(b) (Deliverables in house style)
- sec. 7159; GBL sec. 771; Fla. Stat. sec. 489.1425; Tex. Prop. Code sec. 53.255 (Deliverables in house style)
- Civ. Code secs. 8132 to 8138; Tex. Prop. Code secs. 53.281 to 53.287; Fla. Stat. sec. 713.20 (Deliverables in house style)
- Form WH-347 (Deliverables in house style)