Construction Contract Must-Haves 

By Jacqueline Greenberg Vogt and Boris Peyzner of Mandelbaum Barrett PC 

A successful construction project doesn’t just depend on skilled labor and good materials—it starts with the contract. A well-drafted construction contract sets expectations, defines responsibilities, and reduces the risk of costly disputes. 

Owners and contractors alike benefit from understanding the key provisions that determine how risk, responsibility, and payment are handled. Below, we break down seven essential clauses that every construction agreement should address. 

Payment Terms and Retainage: Keeping Cash Flow and Accountability in Balance 

Few issues spark conflict on a jobsite more quickly than payment. A strong contract should make payment procedures transparent, spelling out when invoices are due, what certifications are required for approval, and how much retainage will be held back until project completion.

In New Jersey, the Prompt Payment Act requires timely payments once invoices are properly submitted, but owners can still protect themselves by requiring certifications from architects or construction managers. Retainage—often 10%—provides leverage to ensure punch list items and final cleanup aren’t forgotten.

Milestone-based payment structures can also create balance: contractors get fairly compensated for progress, while owners gain confidence that deliverables remain on track.

Defining the Contract Documents: Establishing a Clear Record 

A construction project is rarely guided by a single document. The contract, drawings, specifications, general conditions, and project schedule all work together. Problems arise when these documents conflict—and without a clear hierarchy, disputes are inevitable.

A well-drafted agreement explicitly identifies every governing document and determines which takes precedence if inconsistencies occur. This prevents confusion later and keeps everyone working from the same playbook. 

The Changes Clause: Managing the Inevitable 

No project goes exactly as planned. Weather, design revisions, or unexpected site conditions can alter the scope of work. The key is not whether changes occur, but how they are managed. 

A “changes in the work” clause provides a roadmap for documenting, approving, and pricing modifications. Change orders formalize the process, ensuring that both parties agree on cost and schedule impacts before work proceeds. This transparency helps maintain momentum and prevents surprises from escalating into disputes. 

Substantial vs. Final Completion: Knowing When the Job Is Done 

Completion is more than a ribbon-cutting. Contracts must define what “substantial completion” and “final completion” mean in practical and legal terms. 

• Substantial completion generally means the project can be used for its intended purpose—tenants can move in, or traffic can flow. It often triggers release of retainage and the start of warranty periods. 

• Final completion comes only when all punch list items are addressed, final inspections passed, and as-built documentation provided. 

Clear definitions protect both sides: contractors know when they’re entitled to payment, and owners can ensure no loose ends remain. 

Insurance Requirements: Allocating Risk Up Front 

Construction carries inherent risks, from accidents on site to property damage. Insurance clauses dictate how those risks are shared. Contractors are typically required to carry liability, auto, and workers’ compensation coverage, while owners may be responsible for builder’s risk policies. 

Requiring proof of coverage before work begins—and updating certificates as needed—ensures financial protection if the unexpected occurs. 

Dispute Resolution: Preventing Conflict from Stalling the Project 

Even with the best planning, disagreements arise. A strong contract doesn’t just outline the work; it outlines how conflicts will be resolved. 

Multi-tiered dispute resolution clauses—such as negotiation, followed by mediation, and only then litigation—can preserve working relationships and reduce costs. Jurisdiction and governing law should also be specified, particularly in multi-state projects, to avoid procedural surprises. 

Indemnity and Lien Protections: Guarding Against Third-Party Claims 

Indemnity provisions protect one party when the other’s actions lead to liability. For example, if a contractor’s work causes injury to a third party, indemnity clauses may require the contractor to defend and reimburse the owner. 

The scope of indemnity can vary—some clauses protect the owner only if the contractor is at fault, while others apply unless the owner is solely negligent. Strong language should also cover legal fees and all costs related to potential claims. 

Lien protections work hand in hand, ensuring owners aren’t financially penalized if subcontractors or vendors go unpaid. Together, these provisions safeguard both project funds and reputations. 

Building on a Strong Foundation 

Contracts are more than paperwork—they’re the backbone of every successful construction project. By addressing these must-have clauses early, owners and contractors create a framework that minimizes disputes, encourages transparency, and sets the project up for a smooth finish. 

Want to learn more? Watch the Construction Contract Must-Haves full presentation. 

Jacqueline Greenberg Vogt is a highly accomplished attorney and Chair of the Construction Law Group at Mandelbaum Barrett PC. With a passion for the construction industry, she draws on her wide-ranging expertise to represent a diverse clientele, including owners, developers, investors, lenders, and contractors throughout every stage of the construction process. Vogt adeptly handles payment disputes, lien claims, defective design and construction claims, delay claims, indemnity claims, personal injury claims, labor, and employment matters, as well as default and convenience terminations. She can be reached at [email protected] or 973.243.7944.

Boris Peyzner is a Partner in Mandelbaum Barrett PC’s Litigation Practice and Construction Law Groups. He has extensive experience as a litigator, both trying and arbitrating cases, as well as in negotiating settlements for individuals and construction industry clients of all sizes. Peyzner is also committed to helping construction firms through the construction project lifecycle. He has extensive experience negotiating and drafting construction contracts, resolving issues related to, among other things, construction defects, delays, liens, wrongful termination, and contractual breaches. He can be reached at [email protected] or 973.327.6605.