A well-drafted construction contract should address project scope, price and payment terms, the project schedule, change order procedures, dispute resolution, insurance and bonding requirements, permits and regulatory compliance, a clear definition of substantial completion, and lien rights and waiver procedures.

A change order is a written amendment to the original construction contract that documents a change in scope, schedule, or price. California courts generally require that changes to a construction contract be in writing if the contract itself includes that requirement. Proceeding with extra work without a signed change order can complicate payment disputes.

A pay-when-paid clause makes a subcontractor's right to payment contingent on when the general contractor receives payment from the owner. California courts scrutinize these clauses carefully — they may be enforceable as a timing provision but cannot completely shift the risk of owner nonpayment to the subcontractor if the clause is not clearly drafted to that effect.

A fixed-price (lump sum) contract establishes a set contract price regardless of actual costs, placing the risk of cost overruns on the contractor. A cost-plus contract requires the owner to pay the contractor's actual costs plus a fee or percentage. Each structure allocates project risk differently and is suitable for different project types and risk tolerances.

Substantial completion occurs when a construction project is sufficiently complete for the owner to use it for its intended purpose, even if minor work or punch list items remain. It typically triggers the owner's obligation to make final payment and starts the limitation period for certain construction defect claims in California.

California's Little Miller Act requires contractors on public works projects to obtain payment bonds and performance bonds as a condition of contracting with public agencies. Payment bonds protect subcontractors and suppliers who are not paid; performance bonds protect the public agency if the contractor fails to complete the work.

A contractor who has not been paid may have the right to suspend work after providing proper notice under the contract, but doing so carries legal risk if done improperly — including potential liability for breach of contract. An attorney should be consulted before suspending work to ensure the contractor's rights and position are properly protected.

A liquidated damages clause pre-establishes the daily financial penalty the contractor will pay for each day the project exceeds the contractual completion date. California courts will enforce such clauses if the amount represents a reasonable estimate of anticipated damages — not a penalty. Contractors should carefully evaluate these provisions before signing.