Reading a Contract Someone Else Wrote Before You Sign It

Why this matters

The contracts that hurt you most are the ones you skimmed. A subcontract or a property manager's agreement is written by their side, and the dangerous parts are rarely dramatic - they are ordinary-looking sentences buried on page three. Learning to read one fast and know where the teeth are is a core owner skill. You do not need a law degree; you need to know the handful of clauses that decide whether you get paid, who eats a problem, and how you get out.

Read it in two passes

First pass, two minutes: skim every heading and read the payment, indemnity, warranty, and termination sections in full. Those four decide most of your exposure. Second pass: read the rest for anything that references another document ("per the prime contract," "in accordance with Exhibit B"). A clause that binds you to a document you have never seen is binding you to terms you do not know. Ask for every attachment it names before you sign.

The map: where the risk hides

Money clauses: how you get paid

Read payment first, always. Pay-if-paid ties your payment to the owner paying the GC, so their risk becomes yours. Pay-when-paid is softer (it sets timing, not a condition), but read which one it is. Retainage holds back a slice of every payment until the whole project closes, which can be long after your part is done. Net terms longer than you can float are a cash-flow problem even if you eventually collect. See related: Cash vs Profit: Why They're Different.

Risk clauses: what you agree to carry

Indemnity is the promise to cover someone else's losses. The dangerous version makes you cover losses even when they were partly at fault - read for "regardless of fault" or "including negligence of the indemnitee." Insurance requirements that name the other party as "additional insured" extend your policy to them; confirm your carrier allows it and that the limits are ones you actually carry. Warranty language that is open-ended or judged by the customer's "satisfaction" is a standard you can never close out. See related: The Hold Harmless and Indemnity Clause in Plain Language.

The tells of a one-sided contract

• Every deadline binds you; none bind them.
• They can terminate "for convenience" (any reason) but you can only terminate "for cause."
• Disputes are venued in their county and the loser pays legal fees, which favors the side with lawyers on retainer.
• It references documents you were not given.
• It is silent on how you get paid for extra work.

None of these automatically kills the deal. They tell you where to push.

How to redline without blowing the deal

You are allowed to negotiate. Mark the one or two clauses that actually threaten you, not every line, and propose specific edits: "cap indemnity to our own work," "strike the pay-if-paid condition," "define the change-order approval process." Send it as a short professional note, not a fight. Get every agreed change initialed by both sides on the final document; a margin note nobody initialed is not part of the contract. Pick the battles that matter. A shop that redlines everything earns a reputation; a shop that redlines the two real killers earns respect.

References

• Trade-standard subcontract families (AGC, ConsensusDocs) for baseline clause language
• State prompt-payment, retainage, and lien statutes (pay-if-paid enforceability varies by state; confirm with an attorney)
• See related: A Customer Hands You Their Own Contract to Sign (decision tree); What Makes a Contract Actually Enforceable