The subcontract review checklist: 15 clauses to check before you sign
A subcontract review checks every clause that moves risk or cash onto you before you sign. These are the 15 that matter most in Australian construction subcontracts, in the order to read them, with the drafting that should stop you and the position to ask for instead.
Where the Australian Subcontract Index measures a clause, the live national figure from real subcontracts is shown with its sample size. Market positions come from those contracts, not opinion.
AI risk report, not legal advice. The scanner gives general information about the risks in a document. It is not a lawyer, does not know your circumstances, and can be wrong. For decisions with legal consequences, get advice from a construction lawyer.
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1.Payment terms and your state's cap
Find the number of days between your payment claim and the due date, and how the clock is drafted. End of month plus 30, or a clock that starts when the builder approves your claim, quietly stretches the wait. QLD, NSW, VIC and WA cap subcontract payment terms by statute.
Red flagTerms longer than your state's cap, or a due date that runs from an event the builder controls, such as certification or the builder being paid.Ask forPayment within your state's statutory cap, counted from the date you serve the payment claim.Index: 25 days median payment terms (n=75)2.Pay-when-paid and pay-if-paid
Search for "paid by the principal", "receipt of payment" and "to the extent the contractor is paid". The Security of Payment Act in every state and territory makes pay-when-paid provisions of no effect, but builders keep drafting them, and many subbies still believe them.
Red flagYour due date, or your entitlement, depends on the head contractor receiving money from the client.Ask forDelete it. Your payment depends on your work and your claim, not on the builder's cash flow.3.Payment claim dates and service
Check the claim date each month, the address or platform claims must go to, what supporting documents are required, and whether the contract shortens the builder's payment schedule window. Under the Act, a builder that misses the schedule deadline generally becomes liable for the full claimed amount.
Red flagClaims only accepted through a portal or to a named person, with supporting documents that are hard to produce, or a requirement that turns any missing paperwork into an invalid claim.Ask forA fixed monthly claim date, service by email to a nominated address, and supporting documents limited to what is reasonable for your trade.4.Time bars on notices
Search for "condition precedent", "shall not be entitled" and "deemed to have waived". These turn a late notice into a lost claim, whoever caused the problem. Note every notice window in the contract and who notices must go to.
Red flagNotice periods of five business days or less, with words that extinguish the claim if notice is late.Ask forTen business days, with notice as a requirement rather than a bar, so a late notice reduces a claim only by the prejudice the builder actually suffered.Index: 100% have time bars that extinguish the claim entirely (66 of 66)5.Extension of time
Check the qualifying causes of delay, the notice window, the detail required in the claim, and whether the builder can grant time while refusing any money for it. Many clauses give time only, never costs, even when the builder caused the delay.
Red flagShort notice windows, a long list of excluded causes, or a clause that lets the builder reduce your time for its own convenience.Ask forA reasonable window, delay caused by the builder or its other trades as a qualifying cause, and delay costs where the builder is responsible.6.Liquidated damages
Find the daily or weekly rate and compare it with the value of your package, not the whole project. Check whether the total is capped, and whether the builder can pass head contract damages straight down to you.
Red flagNo cap, a rate set at the head contract level, or damages that run while the delay is someone else's fault.Ask forA rate that reflects your package, and a cap of 5 to 10 per cent of your contract sum.Index: 78% have liquidated damages with no cap (31 of 40)Index: $1,500/day median liquidated damages rate (n=48)7.Variations
Check whether variations need a written direction, how they are valued where no rate applies, whether you must proceed before a price is agreed, and the notice window for claiming one.
Red flagThe builder values variations at its discretion, verbal directions don't count, or you must do the work now and argue about the price later with a short notice window.Ask forWritten directions, valuation at your schedule of rates or reasonable rates, and the right to confirm a verbal direction in writing.8.Set-off and back-charges
Find the right to deduct, withhold or set off. Check what it covers (defects, delay, other contracts), whether notice is required first, and whether the builder can deduct amounts it only claims, not amounts actually owed.
Red flagSet-off without notice, for any amount the builder claims, including amounts under other contracts.Ask forWritten notice with reasons before any deduction, limited to amounts due under this subcontract.Index: 97% allow set-off without notice (75 of 77)9.Retention and security
Check the percentage, the combined total of cash retention and bank guarantees, the release points, and whether release is tied to your completion or the head contract's. Check whether retention must be held in trust in your state.
Red flagMore than 5 per cent combined, release tied to the head contract's final certificate, or security the builder can call on without notice.Ask for5 per cent combined at most, half released at your practical completion, the rest at the end of your defects period, and notice before any call on security.Index: 5% median retention (n=65)10.Defects liability period
Check the length of the period, when it starts, whether it restarts on each repaired item, and whether it is tied to the head contract. Your retention usually waits for it to end.
Red flagA period that starts at the head contract's completion, restarts on every repair, or has no fixed end date.Ask forA fixed period from your own practical completion, with an outside date.11.Indemnity, consequential loss and insurance
Read the indemnity for words like "arising out of or in connection with" and check whether it is reduced where the builder contributed to the loss. Check whether the consequential loss exclusion protects both parties, and compare the required insurance limits with your actual policies.
Red flagAn indemnity for any loss connected with your work whoever caused it, a consequential loss exclusion that only protects the builder, or insurance limits you don't hold.Ask forLiability proportionate to your fault, a mutual consequential loss exclusion, and insurance requirements that match your policies.12.Termination for convenience
Find any right to terminate "for convenience" or "at any time". The question is rarely whether it exists, but what you are paid when it is used: work done, materials ordered, demobilisation and lost margin.
Red flagTermination on notice with payment only for work completed and approved, nothing for materials, demobilisation or margin.Ask forAn exit account: work done, materials ordered, demobilisation costs and a reasonable share of lost margin.Index: 88% include termination for convenience (72 of 82)13.Suspension and default termination
Every state's Act gives you a statutory right to suspend work for non-payment in defined circumstances, after written notice. Check the contract doesn't try to take that away, and check the default clause: how long you get to fix a breach, and whether minor breaches can trigger termination.
Red flagShow cause periods of a day or two, termination for any breach however minor, or a clause that treats lawful suspension as abandonment.Ask forA reasonable cure period for any breach, and an acknowledgement of your statutory right to suspend.14.Deeds, releases and novation
Look for deeds of release tied to final payment or retention, guarantees by directors, and novation clauses that let the builder hand your contract to someone else. Releases signed to get retention back often give up claims you didn't know you had.
Red flagA release of all claims as a condition of final payment, a personal guarantee, or novation without your consent.Ask forReleases limited to the amount being paid, no personal guarantees, and novation only with your written consent. A deed is the point to call a lawyer.15.One-sided standard form terms
Since November 2023 unfair terms in standard form small business contracts can be void, and penalties apply. Small means fewer than 100 employees or under $10 million turnover. Builder templates handed over on a take it or leave it basis are often standard form contracts.
Red flagRights that only run one way: the builder can vary the contract, terminate or limit its liability, and you can't.Ask forMutual rights, or deletion of the one-sided term. Raising the unfair contract terms laws often moves a builder on its own.
Turn the red flags into a departure schedule
Builders respond better to a short schedule of proposed changes than to a marked-up contract. List each clause, the wording you want instead and one line on why. See how to write a departure schedule, or let the scanner draft one from your contract.
Weighing a lawyer against a free scan? The honest comparison is on the subcontract review page, and the cost question is in what a subcontract review costs.
Subcontract review by state
Common questions
What should be on a subcontract review checklist?
The clauses that move money and risk: payment terms against the state cap, pay-when-paid wording, claim dates and service, notice time bars, extension of time, liquidated damages, variations, set-off, retention and security, the defects liability period, indemnities and insurance, termination for convenience, suspension and default, deeds and releases, and one-sided standard form terms. Check the builder's ABN, licence and insolvency record first.
Which clause should I check first?
Payment terms and time bars. Payment terms decide your cash flow on every claim, and a notice time bar can wipe out an entire delay or variation claim if you miss it by a day. In the Australian Subcontract Index, almost every contract where the notice drafting was identifiable makes a late notice fatal to the claim.
Can I use this checklist instead of a lawyer?
It is a checklist, not legal advice. It tells you where to look and what market drafting looks like. Use a construction lawyer for large exposures, deeds and guarantees, design responsibility and live disputes.
Is there a faster way to run the checklist?
The free Subcontract Risk Scanner reads the whole subcontract and checks these clauses in about two minutes, against your state's Security of Payment Act and the Australian Subcontract Index. It can also build a departure schedule of the changes to ask for.