Construction Contract Glossary

Plain-English definitions of the construction contract terms that drive project risk. Use this glossary to decode the language in your prime contracts and subcontracts.

Indemnification

A clause requiring one party to defend, pay for, and absorb losses caused by another. Broad indemnification clauses can shift liability for the other party's negligence onto you — review carefully.

Pay-if-paid

A payment clause making the GC's receipt of payment from the owner a condition precedent to paying the subcontractor. If the owner never pays, the sub never gets paid. Distinct from "pay-when-paid," which only affects timing.

Pay-when-paid

A payment clause that affects the timing of payment to the subcontractor but does not eliminate the obligation to pay. The GC must still pay within a reasonable time, even if the owner has not paid.

Liquidated damages

A pre-agreed dollar amount payable per day (or other unit) of delay. Often paired with no-damages-for-delay clauses, which can leave the contractor absorbing schedule risk in both directions.

No-damages-for-delay

A clause limiting your remedy for owner- or GC-caused delay to a time extension only — no money. Often unenforceable in part, but always worth challenging.

Notice requirements

Strict procedural deadlines for asserting claims for change orders, delays, or differing site conditions. Missing the notice window can waive the claim entirely, even if you're substantively right.

Flow-down clause

A subcontract provision binding the sub to the same obligations the GC owes the owner under the prime contract. Read the prime to know what's flowing down.

Differing site conditions

Conditions encountered at the site that differ materially from those indicated in the contract documents. The clause governs whether (and how) you can recover the cost impact.

Change order

A written modification to the contract scope, price, or schedule. Proper change-order procedures (and notice) are how you protect margin when the work changes.

Lien waivers

A document signed by the contractor or sub waiving lien rights for work performed through a stated date. Conditional waivers are tied to actual receipt of payment; unconditional waivers are not.