Negotiating Contractor and Subcontractor Agreements

The most dangerous clauses in vendor contracts aren’t the ones you fight over. They’re the ones you skim past—(em dash mine 😑) the “standard” terms that seem harmless until they explode. Just ask Morgan Stanley. Overlooked contractual gaps turned a vendor’s mishandling of client-data-bearing equipment into hundreds of millions in fines, settlements, and penalties for Morgan Stanley. I have identified some top of mind examples: #1: The Subcontracting Black Hole Most vendor contracts include innocent-looking language like: "Vendor may engage subcontractors as necessary to perform services." The problem: You have zero visibility into who's actually handling your sensitive data or critical operations. What Morgan Stanley missed: Their vendor subcontracted the actual data destruction to an unqualified third party. The fix: • Require prior written approval for all subcontractors • Mandate the same security/compliance standards flow down • Include right to audit subcontractors directly • Cap subcontracting to specific, pre-approved functions #2: The Liability Cap Loophole Standard cap: "Vendor's liability limited to fees paid in preceding 12 months." The hidden trap: This covers the vendor's mistakes but not the regulatory fines, customer lawsuits, and reputational damage you'll face. What to negotiate: • Separate caps for different types of damages • Higher caps for data breaches and regulatory violations • Unlimited liability for gross negligence and willful misconduct • Minimum insurance requirements that match your actual risk exposure #3: The Termination Cost Surprise Innocent clause: "Upon termination, vendor will assist with transition for 30 days." The trap: No mention of data extraction, migration costs, or knowledge transfer requirements. Real example: A SaaS company switching CRM vendors discovered "transition assistance" meant read-only access to export screens. Manual data extraction cost $47K in consulting fees. Protection strategies: • Define data export formats and timelines • Cap termination assistance fees • Require knowledge transfer documentation • Include escrow provisions for critical operational data #4: The Change Order Cash Grab Standard language: "Any modifications require mutual written agreement." The hidden cost: No controls on pricing for change orders or scope creep. Pattern I see: Vendors lowball initial proposals then recover margins through change orders priced at 200-400% markup. The armor: • Cap change order pricing as percentage of original contract value • Require detailed justification for scope changes above set thresholds • Include right to third-party validation for major change orders • Build in quarterly spend reviews with automatic triggers The point is, most "standard" vendor contracts are written to protect vendors, not you. Don't let your "standard" vendor agreement become someone else's cautionary tale. Dig deep. #VendorManagement #ContractReview #RiskManagement

The MSA Negotiation Checklist I Use to Protect My Company. I review MSAs weekly. This checklist saves me from missing critical items. Scope and Deliverables → Define services clearly. Avoid open-ended language. → Include acceptance criteria. Know when the job is done. → Add change order process. Scope creep kills budgets. Payment Terms → Net 30, not net 60. Cash flow matters. → Milestone-based payments, not time and materials where possible. → Late fees for delayed payments. Incentivize on-time payment. Liability → Mutual indemnification. One-sided is a red flag. → Cap liability at 12 months fees. Lower for high-risk deals. → Exclude gross negligence and willful misconduct from the cap. → No liability for indirect, consequential, or lost profits. Data and Security → Define confidential information. Be specific. → Include data security standards. Reference SOC 2 or ISO 27001. → Add breach notification. 24 to 48 hours, not reasonable time. → Require data deletion post-termination. Confirm destruction. Termination → Termination for convenience. 30 days notice minimum. → Termination for cause. Define breach clearly. Include cure period. → Survival clauses. Know what outlives the agreement. IP Ownership → Background IP stays with owner. → Foreground IP goes to customer for custom work. → License back for provider to use learnings. Limited scope. Dispute Resolution → Governing law. Pick your jurisdiction. → Venue. Home court advantage where possible. → Escalation clause. Try executive resolution before litigation. Insurance → General liability. $1M minimum. → Cyber liability. $5M minimum for data-heavy deals. → Professional liability. For service providers. Final Review I read the entire document. I check cross-references. I confirm defined terms match throughout. One error in Section 12 can void your protection in Section 5. What do you add to your MSA checklist? Share below. I will add it to mine. #msa #contractnegotiation #commercialcontracts #legalops #inhouselegal #checklist

This NEC4 clause is bankrupting small subcontractors (and nobody's talking about it). I've seen three viable businesses go under in the past 18 months. Same pattern every time. The problem? Most NEC4 subcontracts don’t fully mirror the obligations in the head contract. Subcontractors rarely see the head contract. So, they submit claims that are valid under their subcontract but still rejected upstream. Here's how you lose money: → You notify a compensation event under Clause 61.3 (8-week window). → Main contractor passes it upstream to the client. → Client rejects it based on head contract terms you've never seen. → Main contractor rejects your claim → You eat the costs. Your claim was procedurally perfect under your subcontract. But commercially dead because the head contract didn't support it. Real example 1: → You claim Clause 60.1(12) – unforeseen ground conditions. → Conditions were genuinely worse than expected. → But the head contract Site Information warned of those exact conditions. → Clause 60.2 says contractors "assumed to have taken into account the Site Information". Client rejects upstream → Main contractor rejects your claim → You eat £150K in extra costs. You had no idea that geotechnical report even existed. Real example 2: → Late site access under Clause 60.1(2). → Sounds legitimate, right? → Except the head contract Accepted Programme showed the client providing access two weeks later than you assumed in your programme. Client rejects under Clause 61.4  → Main contractor rejects your claim → £200K gone. Again, you never saw the head contract programme that governs your entitlement. The commercial trap: → Main contractors write subcontracts that appear back‑to‑back but aren’t in practice. → Your compensation‑event rights seem secure - until the head contract disagrees. → If they can’t recover it from the client, you won’t recover it from them. The difference? They know both contracts inside out. You only know yours. What actually bankrupts subcontractors: Submitting claims that were never valid under the head contract in the first place. You're wasting money on: → Preparing quotations for claims the client will reject → Incurring costs expecting compensation that will never come → Fighting disputes you can't win All because you priced risk based on a head contract you never read. What you must demand before signing: ✓ Read the head contract (or key extracts) ✓ Review the Head Contract Accepted Programme that governs access dates ✓ Study the Site Information that defines "foreseeable" conditions ✓ Understand what Clause 60.1 events the client will actually accept upstream Stop asking: "Is this valid under my subcontract?" Start asking: "Can my main contractor claim this from the client?" Because if they can't claim it upstream, you're not getting paid.   Are you pricing based on a contract you've never read?

A client told us they'll only pay 90 days after our service was delivered - "it's standard in our company". It was a big deal. But it would cripple our cash flow. We deliver and pay our team today, then wait 3 months to get paid? Huge red flags. Without enough cash in the bank - salaries, rent, our expenses were at risk. So we took a tough call. Said no. And this isn't the only contract trap I've seen. Here are the 4 clauses that can kill your business if you're not careful: 1. Extended payment terms (Net 60/90/120+) ↳ Client wants 60-120 days to pay after you send the invoice.  You pay your team today. Client pays you 2-4 months later. ↳ How to handle it: Negotiate down to Net 30. Take 50% upfront. Or increase your rate by 10–20% to cover the cost of delayed cashflow. 2. Unlimited Revisions ↳ "You'll keep revising till we're happy, right?"  A $3,000 project becomes 47 revisions and 60 hours of unpaid labour. ↳ How to handle it: Cap revisions at 2-3 rounds in the contract. After that, charge per revision or per hour. 3. "We'll pay you when our client pays us" ↳ Your payment depends on a person you’ve never met. Their client delays → you don’t get paid. ↳ How to handle it: Simply say no. This is 100% a deal-breaker. 4. One-Sided IP and Liability ↳ Two problems here: They own all your work even if they don't pay. AND you're liable for everything that goes wrong. ↳ How to handle it: Add TWO clauses.  First: "IP transfers only upon full payment."  Second: "Service provider's liability is limited to the project value.” 5. NDAs that don't allow any disclosure ↳ If you do great work for them, but can't include it in your portfolio, it's worth a lot less to you. ↳ Mention that though the work is your client's IP, you're allowed to use in your portfolio for promotion. Every clause is negotiable. But ONLY before you sign. After that, you lose all leverage. Your services have value. Your agency isn't desperate. And your contract should reflect that. What's the worst contract term you've ever seen? #contracts #legal #founders #business

𝐈𝐭’𝐬 𝐨𝐧𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐦𝐨𝐬𝐭 𝐝𝐞𝐛𝐚𝐭𝐞𝐝 — 𝐚𝐧𝐝 𝐬𝐨𝐦𝐞𝐭𝐢𝐦𝐞𝐬 𝐩𝐚𝐢𝐧𝐟𝐮𝐥 — 𝐭𝐨𝐩𝐢𝐜𝐬 𝐢𝐧 𝐨𝐮𝐫 𝐢𝐧𝐝𝐮𝐬𝐭𝐫𝐲. 💸 Ever wondered how payment terms really work between Main Contractors and Subcontractors? Let’s break it down clearly 👇 ⸻ ✅ 1. Advance Payment Usually 0–10% of the contract value — to help the subcontractor mobilize resources on site. 💡 Always backed by an Advance Payment Guarantee (APG) to protect the main contractor. 👉 In some cases, it can be higher, depending on how much the subcontractor must pay upfront for materials — for example, curtain wall, steel structure, or other material-intensive packages. ⸻ ✅ 2. Progress Payments Paid monthly or more for certified work done. Typical term: 30–60 days from certification. ⚠️ Often includes a Pay-When-Paid or Back-to-Back clause — meaning the subcontractor only gets paid once the main contractor is paid by the client. ⸻ ✅ 3. Retention Usually 5–10% of each payment is held to ensure quality and completion. • 50% released after project completion. • Remaining 50% after the Defects Liability Period (DLP). 💡 If cash flow is tight, this can be replaced by a Retention Money Guarantee (RMG). ⸻ ✅ 4. Final Payment Released after the final approval — once all closeout documents are submitted (warranties, as-built drawings, No Claim Certificate, etc.). ⸻ Strong subcontract agreements protect both sides. They give the main contractor control over quality and timelines, and give the subcontractor fair visibility over cash flow. 🤔 What about you? How did your 𝐥𝐚𝐬𝐭 𝐧𝐞𝐠𝐨𝐭𝐢𝐚𝐭𝐢𝐨𝐧 about payment terms go? #Procurement #PaymentTerms #construction #MarinaAyad

How should Subcontractors anticipate the disorder they'll have with a GC before even submitting the bid? I always worked for self-performing GCs and one of the first things I was thought was never to be the reason a Subcontractor fails. We wanted great relationships BUT unfortunately, I hear the complete opposite these days more often than not. It's terrible. If you're bidding to a specific general contractor, you should know a few critical things before you price the job: 1) Are they good payers? 2) Are they going to negotiate and beat your price down before the award? 3) What’s the competency level of their managers (this can vary from project to project so think top-level)? It's always advisable to NOT bid with GCs or Owners who don't treat you right! BUT speaking with many contractors and knowing the intense competition, especially in and around major cities, that's not always an option. You need backlog and not every opportunity is perfect. So how do we proceed with a contractor who isn't so bad and manageable but has flaws that don't exactly align with what you want out of a relationship?? A lot of subcontractors complain that they’re not making money with certain GCs. But most of that stress could have been anticipated during the estimating phase. The largest pain points usually boil down to lack of communication, bad payers resulting in bad cash flow, and "nobody wants to sign my change orders". 1) Payment Terms – Can you afford to float this job? If they’re known for slow payments, have you factored that into your cash flow projections? Did you calculate how much money you’ll need to borrow to keep the job moving? Did you build the cost of borrowing into your bid? 2) Negotiations – Never negotiate profit ONLY scope!! If you know they’ll push hard on your price, don’t just cave. Instead: Offer value engineering solutions. Show them how to lower costs without cutting your margins. Set the tone early. Train them in pre-construction on how to work with you. Always have a contingency in your estimate. Expect negotiation, but never negotiate profit. If they don't want to give you the time of day to sit down like a professional, then you need to make an important decision if it's even worth getting into a contract with them. 3) Project Management – Will their incompetence cost you? If their team is disorganized, the project will likely: Drag on longer than expected. Generate a ton of change orders or scope creep, which they may fight paying for. Cause schedule delays that hurt your productivity. If you still want the job, price in the risk! Plan for change order headaches. Don’t flood the job with labor upfront when you just start. Start slow, get a feel for the site, and ramp up strategically. Bottom Line -> Not every GC is worth working for. But if you choose to, anticipate the chaos before you bid and price accordingly. What’s your experience working with tough GCs? #proaccel #constructionoperations

"Who's providing the scaffolding?" "You are!", "No, YOU are!": Welcome to a common construction dispute. Who does what and when? The problem: Most contracts are vague about who does what and when. Everyone assumes someone else is handling the critical items. An example: Subcontractor prices the painting but obviously needs scaffolding to reach the walls. Head contractor says "that was in your price." Subcontractor says "no, you provide site facilities." Head Contractor says no where does the Subcontract say that & sets off the cost of the scaffolding. Arguments start. The solution I've been using since 2017: A Responsibility Matrix. Simple table in the contract that lists: → Who provides scaffolding (Head contractor) → Who gets building approvals (Client) → Who handles development permits (Client) → Who provides mess facilities (Head contractor) → Who does the actual work (Subcontractor) Why this works: Everyone knows exactly what they're responsible for. No assumptions. No arguments. No surprise costs. I first created one on a dredging project where responsibilities kept getting confused during negotiations. It saved ENDLESS disputes later. I see responsibility matrix’s in mainstream building too:   Development approvals, building approvals, the whole approval circus. They list who handles what and when. Smart. Clear. Prevents disputes. So instead of "I thought you were doing that," you get "Page 47, Schedule 3 - it's your responsibility." Game changer for complex projects: Multiple parties, multiple responsibilities, multiple opportunities for confusion. The responsibility matrix cuts through all of it. Best part: Takes 30 minutes to create. Prevents no end of disputes. Because clarity at the start beats arguments at the end. P.S. Want to get smarter at contracts, claims, and commercial risk? I drop sharp, no-BS insights straight from the top of the industry. Join my FREE newsletter here — don't miss what’s coming: https://lnkd.in/ga9WGi6C