Construction projects depend heavily on the written agreement between the client and the general contractor. But even well-intentioned contracts can lead to disputes when certain terms are vague, missing, or slanted toward one party. Without careful review, project owners may find themselves facing delays, budget overruns, or legal action.
This article outlines key warning signs in general contractor agreements that often lead to conflict. By recognizing these issues early, homeowners, property managers, and business owners can take preventive steps to avoid costly misunderstandings and protect their investments.
Vague Scope of Work Descriptions
When the scope of work is not clearly defined, disputes are almost guaranteed. A well-drafted contract should precisely outline what is being built, the quality expectations, and who is responsible for each part.
Poorly Defined Deliverables
If the contract lacks specific references to materials, finishes, or technical specs, disagreements can arise. For example, a general clause like “install new kitchen cabinets” leaves room for interpretation. One party might expect solid wood; the other might install a particle board.
No Inclusion of Drawings or Plans
A good contract references blueprints, engineering reports, or specifications by name and date. If these are missing, it becomes difficult to confirm whether the contractor met their obligations.
Incomplete Timelines
Vague schedules such as “project to start in summer” or “to be completed in a timely manner” do not provide enforceable benchmarks. Time delays can escalate into disputes without clear milestones.
Payment Terms That Shift Risk
A fair payment schedule aligns with work completed. Problematic payment terms either frontload too much money or create uncertainty that exposes clients to financial risk.
Upfront Payments Exceeding Industry Norms
A deposit over 30% of the total cost without a corresponding performance bond or materials delivery schedule can indicate a contractor looking to minimize their own risk—at the client’s expense.
Milestone Ambiguities
Avoid agreements that define payments based on vague terms like “project halfway done.” Each milestone should link to a clearly measurable completion event.
Final Payment Before Inspection
Releasing the final payment before a walkthrough or punch list resolution gives up the client’s leverage. A standard practice is to retain 5–10% of the contract value until all work meets agreed standards.
Change Order Procedures Are Missing or Weak
Change orders are a normal part of any project, but contracts without structured procedures for handling them can lead to inflated costs or delays.
Lack of Written Change Order Clause
Contracts should require that all scope, time, or cost changes be documented and approved in writing before work proceeds. If verbal agreements are allowed, disputes become much harder to resolve.
No Price Adjustment Guidelines
Without baseline labor or material rates, it’s difficult to evaluate whether the cost of a change is fair. This opens the door to overcharging or padding estimates.
| Change Order Risks | With Clause | Without Clause |
|---|---|---|
| Clarity on pricing | Fixed or formula-based | Open to negotiation |
| Delay impact addressed | Time extensions allowed | Unexpected delays |
| Dispute resolution path | Documented steps | Verbal conflicts |
Dispute Resolution Clauses Favor the Contractor
Some contracts are written to give the contractor control in case of disagreement, limiting the client’s ability to resolve issues fairly.
Mandatory Arbitration Without Appeal
While arbitration can reduce legal costs, mandatory binding arbitration with no appeal limits legal recourse. Ensure arbitration terms are mutual and allow for fair representation.
One-Sided Termination Clauses
If only the contractor can cancel the agreement without penalty, this introduces a risk of walking away mid-project, especially if costs increase.
Attorney Fees Only Recoverable by One Party
Clauses that award legal fees to only the contractor create a deterrent for the client to pursue rightful claims.
Insurance, Permits, and Licensing Not Clearly Stated
Contracts that do not clearly define who is responsible for permits, inspections, and insurance coverage may expose the client to liability.
Missing License and Insurance Verification
The contract should include the contractor’s license number and insurance certificate details. Without this, clients may be liable for property damage or worker injuries.
Permits Labeled as “Client Responsibility”
If the contractor shifts permit duties to the client without disclosure, this can delay the project or violate local building regulations.
Retainage or Holdback Terms Left Out
Retainage is a common practice where a portion of the contract value is held until all work is completed satisfactorily. Omitting it can remove an important quality control tool.
No Final Incentive for Completion
Contracts without retainage or final walkthrough requirements can lead to punch list items being ignored or delayed.
No Clause for Withholding Payment
Without a clause that allows the client to withhold payment if work is unsatisfactory or delayed, the contractor holds all the leverage once paid.
Communication and Documentation Expectations Unclear
Regular updates, documented decisions, and communication protocols reduce misinterpretation. Contracts without these guardrails often result in confusion.
No Defined Point of Contact
If the contract does not assign a primary contact on both sides, messages may be missed or duplicated, delaying critical decisions.
Missing Progress Report Requirements
Contracts that do not require regular status updates, photos, or logs create blind spots. Issues might go unreported until they escalate.
Common Questions
What happens if a contractor refuses to sign a detailed contract?
This may be a red flag. A refusal to document terms clearly can indicate a desire to avoid accountability or keep terms flexible for their benefit.
Can I revise a general contractor agreement after signing it?
Only if both parties agree. Revisions must be made in writing and signed by both the contractor and the client to be enforceable.
What should I do if the contractor doesn’t meet the agreed deadlines?
Refer to the contract’s delay or penalty clause. If it’s missing, you may have limited legal grounds unless damages can be proven. Always include delay penalties in the original agreement.
How do I verify a contractor’s license or insurance?
Ask for a copy of their license and certificate of insurance. You can cross-check license status with your local contractor licensing board or state website.
Conclusion
Construction agreements are more than paperwork—they’re legal frameworks that define roles, expectations, and remedies. Overlooking common warning signs in general contractor agreements often leads to scope confusion, payment disputes, and unmet deadlines. Reviewing every clause carefully before signing can prevent misunderstandings and improve outcomes.
The most reliable contracts are those that clearly outline responsibilities, timelines, payment triggers, and dispute pathways. By identifying weak spots early, property owners and project managers can reduce risk, improve accountability, and ensure the work is completed as agreed.
FAQs
What are common red flags in contractor agreements? Vague scope descriptions, missing payment schedules, and no dispute resolution terms are all common red flags. Contracts should define expectations clearly to prevent future conflict.
Should change orders always be in writing? Yes. Verbal changes are difficult to enforce. Always request written change orders that specify costs, timelines, and approvals before work continues.
Is it normal to pay more than 30% upfront? No. Most professionals recommend limiting upfront deposits to 20–30%. Larger deposits without performance bonds increase client risk.
Can I fire a contractor if they breach the agreement? Yes, but only if the contract includes a termination clause for cause. Document breaches and provide written warnings before terminating to reduce legal exposure.
Do general contractors need insurance? Absolutely. Contractors should carry general liability and workers’ compensation insurance. Verify active policies before signing any agreement.
Reviewer: Chloe Martinez brings 8 years of experience in home improvement. Feedback from Chloe helped shape this post to better support companies working to strengthen their reputation and expand their reach.
