What Every Contract For Contractors Should Cover — Before You Sign

There’s no one-size-fits-all construction contract for every project. The right contract for contractors depends on more than just scope. It’s also about size, number of trades involved, schedule, and a handful of other factors specific to your situation.

What doesn’t change is this: certain provisions need to be in every contract, regardless of project type. Knowing what they are — and what to look for — puts you in a much stronger position before you sign anything.

Single Contract vs. Separate Contracts

A project can be structured under a single contract covering all the work, or through separate agreements for different phases.

Under a single contract, one contractor is responsible for everything. This includes directing and coordinating all parties, managing trades, and serving as your first line of defense if claims arise. That contractor is your prime contractor, and the terms you establish with them are critical to your project’s success.

The Contract for Contractors — Core Provisions

This is a very general overview of a contract for construction. For a complete, detailed section by section understanding of contract terms see our 9-part series “Before You Sign“.

Scope of Work

This section identifies your project drawings and specifications — collectively called the contract documents. Along with the architects and engineers responsible for the design.

The contractor agrees to furnish all materials and labor to perform the work in accordance with those documents. Make sure it’s explicit that the contractor cannot make scope changes or substitute products without your written consent.

Time of Completion

Every contract should state a project start date and a completion date. The start date should never precede the contract execution date.

The completion date can be expressed as a specific calendar date or a defined number of days. But if it’s days, be sure to clarify whether those are work days or calendar days. That distinction matters more than most people realize.

This section is also where liquidated damages (financial penalties for late completion) and early completion bonuses are addressed, if applicable. For most residential remodels and renovations these aren’t typical, but on larger projects they’re worth considering.

Contract Price

Under a lump-sum agreement, this is the total price you’ve accepted or negotiated. The contract should be clear that this amount can only be adjusted through a written, agreed-upon change order. Never verbally, and not unilaterally.

Progress Payment Terms

This defines how often your contractor gets paid and on what timeline. A common structure: the contractor submits an invoice at the end of each 30-day billing period. The payment then due from you within 30 days of that submission.

Payment terms matter in both directions. If you don’t pay within the agreed window, the contractor has the right to file a lien against your property.

Know your state’s statutes on contractor lien rights and your obligations for timely payment before you sign. Contractors may also include interest charges for late payment — that language is worth reading carefully.

Retainage

Retainage is a percentage of each payment that you withhold as a guarantee of satisfactory completion. The standard is 10% of the value of work billed.

It protects you by ensuring the contractor stays engaged and pays their trades. It’s released at final completion once the work is accepted and any outstanding issues are resolved.

Schedule of Values

On larger projects, the contractor will submit a schedule of values. This a breakdown of the total contract amount allocated to each division of the work (e.g., plumbing, electrical, drywall, painting).

When they invoice monthly, they bill against the completed percentage of each line item. Contractors may also request payment for materials purchased and stored on-site but not yet installed. Your contract should address the conditions under which stored materials are billable.

Final Payment and Acceptance

When the project is complete, the contractor invoices for the remaining balance including any retainage withheld. This means all work has been accepted, and any required inspections by local authorities have been signed off.

Before releasing final payment, make sure you have all closeout documents in hand: lien releases from the contractor and all subcontractors, warranty documentation, and any required permits or certificates of occupancy.

Remember, in a contract for contractors final payment is your last point of leverage so be sure to use it.