5 Contract Clauses That Catch Subcontractors Out

(And How to Spot Them Early)

Most subcontractors don’t lose money because of poor workmanship — they lose it because of what’s written (or hidden) in the contract.

Builder contracts are usually drafted to protect the head contractor first. If you’re not careful, risk gets quietly pushed downstream, leaving subcontractors exposed to delays, unpaid variations, and cash-flow pressure.

Here are five clauses we regularly see cause problems, and what you should be looking for before signing.

1. Broad “Scope of Works” Clauses

A vague or overly broad scope is one of the biggest traps for subcontractors.

These clauses often say things like:

“The subcontractor is responsible for all works necessary to complete the project.”

The issue?
It allows builders to argue that extra work was always included, even if it wasn’t priced.

What to look for:

• Clear inclusions and exclusions

• Drawings and documents listed properly

• Any wording that suggests “everything required”, not just what’s documented

If it’s unclear, that risk usually lands on you.

2. Unfair Variation Clauses

Some contracts make it extremely difficult to get paid for variations.

Common issues include:

• Short notice periods (24–48 hours)

• Strict formatting requirements

• Clauses stating unapproved variations won’t be paid

In reality, work often moves too fast for perfect paperwork.

What to look for:

• Time limits for submitting variations

• Whether verbal instructions are recognised

• Whether pricing can be agreed after the work is done

Unreasonable variation clauses can quietly destroy margins.

3. “Pay When Paid” (or Disguised Versions)

While true “pay when paid” clauses are restricted in many jurisdictions, some contracts still disguise them.

For example:

“Payment to the subcontractor is conditional upon the builder being paid by the principal.”

This shifts the principal’s risk directly onto you.

What to look for:

• Any conditions tied to the builder being paid

• Extended payment timeframes

• Ambiguous payment triggers

Cash flow issues often start here.

4. Defects & Warranty Clauses with No End Date

Some contracts include defect obligations that last far longer than reasonable — or aren’t capped at all.

This can expose subcontractors to:

• Ongoing liability years after completion

• Retention being held longer than expected

• Insurance complications

What to look for:

• Defects liability period length

• Clear end dates

• Limits on responsibility

If there’s no clear finish line, the risk stays open.

5. One-Sided Termination Clauses

Termination clauses often favour the builder heavily.

Examples include:

• Termination “for convenience”

• Limited rights for subcontractors to suspend work

• No compensation if terminated early

This leaves subcontractors vulnerable if a project changes direction.

What to look for:

• Your right to suspend work for non-payment

• Compensation if terminated without fault

• Notice periods and cure rights

If termination is one-sided, the leverage is too.

Final Thoughts

Most of these issues don’t look dangerous at first glance. The real risk is how clauses work together once a project is under pressure.

Getting a contract reviewed properly before signing can:

• Reduce disputes

• Protect cash flow

• Save months of stress later

At PreSig Consulting, we focus on practical, builder-side insight — not legal theory — so subcontractors know exactly where they stand.

If you’re unsure about a clause or contract, it’s usually worth asking the question before it becomes a problem.