3 Clauses I Wish Every Contractor Understood

Every contractor encounters daily challenges in construction, but the true risks aren't those visible during the job. The real risks are often hidden in your contract.

Contract clauses can have significant effects on your success or failure on a project, often without you realising it. In my years working with contractors, especially small to medium size contractors, I've seen one common thread in almost every dispute: the contract was signed but never really understood. Too often, the small to medium size contractors are rely on handshakes, verbal promises, or trust built over coffee meetings. But when things go wrong, the only one thing holds up were the wrriten contract, the one that they did not understand at the first place.

Understanding key contract clauses is vital for protecting your business and financial health. In this article, I will highlight three clauses that are often overlooked but should be clearly understood by every contractor before you sign the contract.

The Time Bar Clause

"If you don't notify us within X working days, your claim is not valid".

The time bar clause can catch contractors off guard. It limits the time frame in which claims can be filed. If a contractor misses this window, they may permanently lose their right to pursue that claim.

This clause aims to create certainty in contract performance and to prevent disputes from arising long after a project concludes. For example, if your contract specifies a claim window of 30 days and you forget to file a claim for damages within that period, you lose the chance to seek compensation.

How to protect yourself:

• Know the timeframes in your contract and set internal reminders.

• Submit notices even if you’re still gathering information, you can always update it later.

• Use simple templates to make it easier to comply under pressure.

Variation and Extention of Time Clauses

A variation and extension of time (EoT) provision is essential for contractors, yet it’s often misunderstood or poorly managed. These clauses govern how changes to the scope of work and delays beyond your control are formally approved and compensated under the contract.

Many contractors assume that verbal instructions or obvious delays will be paid for or granted extra time automatically. However, variation and EoT clauses typically require strict notice procedures, written approvals, and supporting evidence, without which you may lose your entitlement to claim. For example, if a site foreman asks you to install additional works without a formal variation, and you proceed without written confirmation, you could end up doing the work for free. Similarly, if you’re delayed due to late site access but don’t submit a notice of delay within the required timeframe, you could face liquidated damages despite the delay not being your fault.

How to protect yourself:

• Know the timeframes for variation and EOT notice and claim in your contract and set internal reminders.

• Read through your contract clauses to understand what cases can be deemed as variation and EOT, and communicate these details across the team.

• Use templates to make sure you covers all grounds under pressure.

• Always document verbal instructions with a follow-up email or written confirmation.

• Maintain daily records (photos, site diaries, communications) to support your claim.

• Provide a schedule of rates/prices at tender stage for variation claims.

Payment Terms and Conditions

For contractors, payment terms directly affect cash flow and profitability. Many contracts have complicated payment terms that can put a contractor at financial risk.

Understanding both the payment claim process and the conditions is essential. To safeguard against any possible unfair risk around payment, negotiate clear payment terms before signing the contract. Specify documents that required for payment claims, valuation methods, any additional conditions and the payment date.

One of the common yet illegal practice, yes, that's right, illegal practice, in the industry is the 'pay when paid' condition on payment. If you heard from your client or main-contractor say "you will get paid when we get paid", then they are effectively breach the Construction Contracts Act 2002, specifically under section 13, where the Act stated the any clause in a contstruction contract that say you only get paid once the client/main contractor gets paid is not valid, this means that the clause have no legal effect and cannot be used to dela or withhold payment that is due to you. And under section 12, the Act make sure that no construction contract could contract out of CCA.

How to protect yourself:

• Check that your contract specifies clear payment due dates based on your own performance or agreed timelines.

• Reject any clause that delays your payment until the head contractor is paid, this is unlawful under the CCA.

• Use properly formatted payment claims under the CCA to trigger your legal right to be paid.

• Keep records of submitted claims and follow up promptly with payment schedules or notices of non-payment if deadlines are missed.

Understanding Key Clauses for Success

In the world of contracting, getting familiar with specific clauses can determine whether a project thrives or leads to financial trouble. The time bar, variation and payment terms are three key areas every contractor should know in depth.

By dedicating time to learn about these clauses and developing strategies to mitigate risks, you can ensure that your contracting business flourishes. Remember, being proactive and informed puts you in a more advantageous position to handle the complexities of contracts in the future.

Always review your contracts carefully becuase your business relies on it.