Introduction
Contract amendments continue to be a major issue in the construction industry, often shifting risk disproportionately onto contractors and subcontractors. This Practice Note aims to highlight key contractual risks, explain why early contract review is essential, and provide guidance on managing amendments effectively.
For those new to the CICV Best Practice Guide (BPG), we strongly recommend reviewing its contractual and commercial management recommendations to reduce disputes and improve cash flow stability.
- Why Early Contract Review Matters
Many contractors fail to review contracts until it is too late. A common scenario is when a contractor only seeks a contract review the day before work starts—by then, it’s too late to renegotiate.
Review the contract at the tender stage to identify risks early.
If amendments are unreasonable, negotiate or price the risk accordingly.
If the contract terms are unacceptable and non-negotiable, be prepared to walk away.
Tip: Some industry bodies, such as the Finishes and Interiors Sector (FIS), offer Contract Review Services to help members identify high-risk clauses before signing.
- Common Risk Areas in Contract Amendments
Below are some of the most problematic contract amendments contractors should watch for:
Payment Terms
- Amendments that delay payments beyond standard terms.
- Retention clauses that extend payment periods or increase retention percentages.
Notice Provisions
- Onerous “time-bar” clauses requiring notification of delays within a very short timeframe (e.g., 2-7 days).
- Strict notice requirements for submitting claims—refer to Practice Note 1 (PN1) on Notices for details.
Liquidated & Ascertained Damages (LADs)
- LAD amounts that are disproportionate to the subcontract value.
- No clear cap on liability, exposing subcontractors to excessive financial penalties.
Practical Completion
- Does the subcontract have its own completion date, or is it tied to the main contract completion?
- Are there unfair dependencies on other contractors’ work?
Variations and Design Responsibility
- Unclear variation procedures—refer to Practice Note 4 (PN4) on Variations for best practices.
- Expansion of Contractor Design Portions (CDP), shifting design liability to subcontractors.
- No clarity on interface issues with other trades or contractors.
Site Conditions and Title Issues
- Clauses that pass responsibility for ground conditions or existing buildings to the contractor.
- Unclear responsibilities for resolving title issues or dealing with external utility providers.
Insurance Requirements
- Contractual insurance provisions that do not align with your actual policies.
Design liability clauses that may not be covered under your Professional Indemnity (PI) insurance.
- How to Manage Unfavourable Amendments
If you encounter onerous contract amendments, you have three options:
- Negotiate the terms with the client/contractor. Many amendments can be modified if raised early.
- Price the risk—factor potential liabilities into your tender pricing.
- Reject the contract and walk away if the risks are too high.
Tip: Industry bodies and trade organisations can provide support if you face unreasonable contract terms.
- Industry Response and Conflict Avoidance
The construction industry is increasingly concerned about excessive contract amendments. The Conflict Avoidance Coalition is actively working with industry experts to address unfair practices.
If you are seeing highly unfair or unworkable contract amendments, reach out to your trade body or the Conflict Avoidance Coalition for support.
For further insights, watch the Cash Flow and Contract Webinar on the CICV website.
Final Advice
Always review contracts before signing—never wait until work is about to start.
Understand your obligations and risks—identify clauses that could impact your cash flow.
Engage in early discussions—negotiate terms that protect your interests.
Seek expert advice—use industry contract review services if needed.
Taking a proactive approach to contract amendments will help mitigate risk, reduce disputes, and improve financial stability.