This Podcast Is Episode Number 0339, And It Will Be About 10 Hidden Construction Contract Traps And How To Avoid Them A new contractor meets an experienced customer, and money changes hands and not the way you expect it.   Typically, this is what happens when you first get started: You bid on a project, and you are the low bidder. You are given the client's standard contract, which contains the client's favorite set of commercial terms and conditions, to sign as a condition of getting the project. You close and sign the contract because you don't want to ask for changes in the terms or consult your construction attorney. You put the signed contract in your bottom desk drawer and pray hard nothing will happen during the project that will cause you ever to have to reread the contract.   Before it is too late, consider these traps to look out for: 1. Poorly defined scopes of work create claims and disputes. 2. The completion schedule is too short and exposes you to monetary damages for failure to finish on time. 3. Payment terms put you in never-ending negative cash flow by loaning the customer money at 0% and borrowing on your credit cards at 24%. 4. The customer keeps 5%-10% of the contract price as retention for up to a year or more after the entire project is finished, which could be all your profit in the project. 5. Indemnity clauses could make you financially responsible for bodily injury and property damage claims caused by customer negligence. 6. Indemnity clauses could make you pay the customer's attorney fees and costs. 7. Your insurance company may be required to provide additional insured coverage for the project giving the customer free insurance and full access to the policy coverage and limits. 8. Often the term and coverage of the warranty are beyond reasonable industry standards. 9. Dispute resolution clauses that require arbitration first and then litigation, probably the two worst ways ever invented to resolve disputes. 10. The client's pre-printed final waiver of lien document (necessary for the contractor to receive final payment) waives all contractor's rights to recover unpaid extra work and to pursue any claims that arose during the project. Ways to avoid contract traps: Your Construction Attorney - is your friend and ally and can save you a lot of grief. Most contracts are easy to read and understand. Scope of Work - Description in the contract is of crucial importance and a well-defined scope of work with details that outlines specific action to be performed by you, the contractor. The scope of work needs also to define work that is excluded and all work to be done by others, including the owner, which may interface with the contractor's scope of work. Never worry about too much detail; that detail will significantly help with the avoidance or resolution of claims and disputes that may arise out of the scope of work. Schedule And Gantt Chart - Make sure you have enough time in the schedule to perform the scope of work. Every minute spent developing your Work-Breakdown-Structure (WBS) is worth an hour or more in the time needed to do the job.     Add Contingency To Your Schedule - Minor delays, weather, equipment problems, etc. always happen. Do not expect the customer to be sympathetic and allow more time for delays. It is imperative if the contract has liquidated money penalty damages for late completion. Payment Terms - Should need to add positive cash flow. Get cash coming in early and often. Paid when Paid and paid if paid terms are ridiculous, and we recommend not signing them ever! Clients who want these types of payment terms all have access to plenty of money and can pay you. Remember, cash is king! Retention - Instead of retention being withheld from your progress payment invoices, consider providing a warranty guaranty instead, but check with your construction attorney first!  Indemnities - Can open the door to your cash...