Signing a subcontract without a proper review is one of the most expensive mistakes in construction. Yet it happens constantly — tight programmes, pressure to mobilise, and a general assumption that "the terms are standard" lead subcontractors to skim contracts or skip the review entirely. The problem is that by the time a dispute arises, you're already bound by whatever you signed.
This subcontractor contract review checklist covers the 12 clauses that deserve your attention before you put pen to paper. It won't replace legal advice on a complex contract, but it will help you spot the most common risks and ask the right questions. Tools like LazyQS contract review can speed up this process by flagging risks automatically, but understanding what to look for yourself is the essential first step.
Payment and Cash Flow
1. Payment Terms and Timing
Late payment is the single biggest cash flow risk for subcontractors, and it often starts with the contract terms themselves. Payment cycles of 60 or even 90 days are not uncommon in bespoke subcontracts, and they can strangle a smaller business.
Check the payment interval — 28 days is standard under both JCT and NEC — along with the due date, final date for payment, and when you need to submit your application. These dates interact, and getting one wrong can delay an entire payment cycle.
Under the Construction Act 1996, the Scheme for Construction Contracts provides a fallback if the contract doesn't set adequate payment terms. If the intervals in your subcontract look unusually long, the Scheme may override them — but relying on statutory protections is never as clean as getting the contract right upfront.
2. Retention Percentages and Release
Retention should be straightforward: a percentage is held back, then released at defined milestones. In practice, it's one of the most disputed areas in subcontracting.
Watch for retention above 5%, vague release triggers, and — critically — no longstop date for release. Without a longstop, you could be waiting years for money you've already earned. The standard approach is to release half at practical completion and the remainder at the end of the defects liability period.
One of the worst clauses to encounter is retention release tied to the main contractor receiving their own retention from the employer. This is effectively a pay-when-paid arrangement by another name. Our guide to construction retention covers retention percentages, release triggers, and recovery in more detail.
3. Pay-When-Paid and Set-Off Clauses
Pay-when-paid clauses are generally unenforceable under the Construction Act 1996 (the sole exception being upstream insolvency). Our pay-when-paid vs pay-if-paid guide explains the distinction and the legal position in detail. However, set-off and contra-charge clauses can achieve a similar effect in practice — money you're owed gets withheld against alleged defects, delays, or other claims.
Check for any clause that conditions your payment on the main contractor receiving payment from the employer. Look equally carefully at set-off provisions: can the contractor deduct amounts without prior notice? Are contra-charges uncapped?
A fair contract should require written notice before any set-off, specify a clear challenge process, and set a reasonable timeframe for you to respond before deductions are applied.
Scope and Programme
4. Scope of Works and Variations
A poorly defined scope is the root of most subcontract disputes. If the contract doesn't clearly describe what's included and what isn't, you'll end up doing extra work for free — or fighting about it later.
Check for a clear specification and scope document, a fair variation valuation mechanism, and clarity on who can instruct variations. If the scope references other documents (employer's requirements, specifications, drawings), make sure you've seen and agreed to every one before signing. Missing a referenced document is one of the most common oversights.
This is exactly the kind of gap that LazyQS tender pack review highlights during tender analysis — cross-referencing scope documents against the subcontract to flag what's missing or ambiguous.
Working through this checklist manually takes hours per contract. LazyQS automates the process — upload your subcontract and get a clause-by-clause risk report with recommended amendments in minutes.
5. Programme and Delay Obligations
Being held to a programme you had no input into is a recipe for trouble. Equally risky is accepting liability for concurrent delay without understanding how it's assessed, or being expected to accelerate at your own cost.
Check whether the programme is a contract document (this matters significantly), what the extension of time notification process looks like, and whether you have any entitlement to loss and expense for employer-caused delay.
Under NEC, the programme is a key contract document (clause 31) and carries real weight. Under JCT, the programme is less formally embedded in the contract but remains commercially important. In either case, understand your obligations before you commit.
6. Liquidated Damages Flow-Down
Main contractors often attempt to pass liquidated damages down to subcontractors in full, regardless of whether the delay was caused by the subcontractor's works alone. This can result in LD exposure that's wildly disproportionate to the subcontract value.
Check whether LDs are capped, whether they apply only to delay attributable to your works, and how the amount compares to the overall subcontract value. A £50,000 subcontract carrying £10,000-per-week LDs should raise immediate questions.
LDs must be a genuine pre-estimate of loss to be enforceable. Amounts that are clearly disproportionate may be challengeable as penalty clauses — but that's an argument best avoided by negotiating sensible terms before you sign. Our guide to liquidated damages for subcontractors covers flow-down mechanics, proportionality, and cap negotiation in depth.
Risk and Liability
7. Insurance Requirements
Insurance schedules in subcontracts can contain requirements that are unavailable, unaffordable, or simply unreasonable for the type of works you're carrying out.
Check the types of cover required — public liability, employer's liability, professional indemnity, contractor's all risks — along with the minimum indemnity levels and, for PI cover, how long it must be maintained after completion. PI run-off requirements of six or twelve years are common but expensive.
Get your broker to review the insurance schedule before signing. Shortfalls in cover don't just put you in breach of contract — they leave you personally exposed. See our plans for what each LazyQS review covers, including insurance schedule analysis.
8. Design Liability
If your subcontract includes any design element, this clause is critical. The key distinction is between a "fitness for purpose" obligation and a "reasonable skill and care" standard — and most subcontractors don't realise how significant the difference is.
Fitness for purpose means the design must achieve the intended result, regardless of whether you acted competently. Reasonable skill and care means you must act as a competent professional would. Most PI insurance policies only cover reasonable skill and care claims and explicitly exclude fitness-for-purpose liability.
If the contract imposes fitness for purpose, either negotiate it down to reasonable skill and care or flag the gap to your insurer immediately. Accepting an obligation your insurance doesn't cover is one of the highest-risk positions you can be in.
9. Indemnities and Limitations of Liability
Uncapped indemnities can expose your business to losses that far exceed the value of the subcontract itself. This is the clause that can put a company under.
Check whether indemnities are mutual (they should be), whether there's an exclusion for consequential and indirect loss, and whether there's an aggregate liability cap. A reasonable cap is typically 100–150% of the subcontract value. No cap means unlimited exposure.
Identifying uncapped liabilities is exactly what a proper risk assessment flags — and exactly the kind of issue that gets missed when contracts are reviewed under time pressure. LazyQS contract review runs this analysis automatically across every clause.
10. Defects Liability Period
The defects liability period keeps you on the hook for remedying defects after you've left site. An extended DLP doesn't just mean more time at risk — it has knock-on effects on your retention, insurance obligations, and resource planning.
Under JCT, the standard DLP (referred to as the rectification period) is 12 months. Under NEC, the "defect correction period" serves a similar function. Check the length, how defects are defined, and critically, whether you have the right to be notified and given the opportunity to remedy a defect before the employer engages others at your cost.
Periods exceeding 12 months should be scrutinised carefully. They extend your retention exposure, may require longer PI run-off, and keep a contingent liability on your balance sheet.
Exit, Disputes, and Ongoing Obligations
11. Termination Clauses
Termination clauses are often heavily weighted in the main contractor's favour. Look for provisions that allow the contractor to terminate at will but restrict your right to walk away, or that withhold payment for completed work following termination.
Check whether termination rights are mutual, what happens to payment for work already completed, and whether you can recover loss of profit if the contract is terminated for convenience (i.e., not for your default).
Under JCT, subcontractors can terminate for non-payment (clause 7.9). Under NEC, termination is governed by clause 90. Ensure your subcontract doesn't strip these protections through bespoke amendments — and if it does, negotiate them back in.
12. Dispute Resolution and Collateral Warranties
Dispute resolution and collateral warranty obligations are often the last clauses reviewed — and among the most consequential.
On disputes, check that your statutory right to adjudication is preserved. You cannot contract out of adjudication on UK construction contracts, but some contracts attempt to impose procedural hurdles that make it harder to exercise. Look at the dispute escalation process: is mediation required first? Is arbitration specified instead of litigation?
On collateral warranties, check what obligations you're taking on to third parties (funders, purchasers, tenants). Are the warranty requirements "reasonable endeavours" to procure, or absolute obligations? Unanticipated warranty obligations can extend your liability to parties you've never dealt with. LazyQS can generate warranty schedules that map these obligations clearly, so nothing gets overlooked.
Your 12-Point Subcontractor Contract Review Checklist
- Payment Terms — Is the payment interval 28 days or less? Are application and due dates clearly defined?
- Retention — Is retention at or below 5%? Is there a longstop date for release?
- Pay-When-Paid / Set-Off — Are there any clauses conditioning payment on upstream receipt? Is set-off limited and subject to notice?
- Scope of Works — Is the scope clearly defined? Have you seen every referenced document?
- Programme — Is the programme a contract document? Do you have a fair EOT process?
- Liquidated Damages — Are LDs capped and proportionate to your subcontract value?
- Insurance — Can you actually obtain the cover required? Has your broker reviewed the schedule?
- Design Liability — Is the obligation reasonable skill and care, not fitness for purpose?
- Indemnities — Are they mutual? Is there an aggregate liability cap?
- Defects Liability — Is the DLP 12 months or less? Do you have the right to remedy?
- Termination — Are rights mutual? Are you paid for completed work on termination?
- Disputes & Warranties — Is adjudication preserved? Are warranty obligations reasonable?
Save this checklist and work through it clause by clause on your next subcontract review.
A thorough contract review doesn't need to take days. Knowing which clauses to focus on — and which risks to flag — makes the process manageable even on a tight programme. The twelve points above cover the areas where subcontractors most often get caught out.
This is exactly the kind of review that LazyQS contract review does automatically. Upload your subcontract and get a clause-by-clause risk assessment in minutes, covering everything from payment terms to collateral warranties.