Construction Contract Clauses That Can Protect Your Illinois Business From Costly Disputes
At The Business Law Group, we work with construction companies, general contractors, subcontractors, and project owners throughout the greater Chicago area. One of the most common problems we help our clients avoid is costly litigation that arises from poorly written construction contracts. Clear, customized contract clauses can protect your business before a shovel ever hits the ground. Whether you’re building a single-family home or managing a multimillion-dollar commercial development, the right contract language matters.
As “The Chicago Business Lawyers®,” we’ve reviewed and drafted countless construction contracts. We know firsthand how a single vague clause or missing term can open the door to lawsuits, delays, and financial losses. Illinois law gives contracting parties the freedom to define their business relationships in detail, so long as the agreement doesn’t violate public policy or state regulations. Our role is to help you take full advantage of that flexibility while making sure you’re fully protected under Illinois statutes like the Illinois Mechanics Lien Act (770 ILCS 60/0.01 et seq.) and the Illinois Freedom to Work Act (820 ILCS 90/1 et seq.).
Here are several construction contract clauses we regularly recommend to help our clients prevent disputes and protect their rights.
Scope Of Work Clause
Every contract should clearly define what work is being done, by whom, and under what conditions. A detailed scope of work prevents misunderstandings about expectations, responsibilities, and deliverables. We often advise our clients to attach plans, specs, and schedules as exhibits to the contract and reference them directly in the language. That way, if there’s a disagreement later, the written record is clear.
Change Order Clause
Construction projects often evolve after they begin. Change orders are how additional work, modifications, or unforeseen conditions are handled. A good change order clause defines how changes must be documented, who can authorize them, and how they impact cost and schedule. Without this clause, verbal changes can lead to disputes and unpaid work.
Payment Terms And Schedule
Illinois contractors are protected under the Prompt Payment Act, but you still need to clearly outline payment terms in your contracts. That includes the amount, timing, conditions for payment, and penalties for late payments. We often recommend milestone-based payments tied to completed phases of work. This protects both parties and helps cash flow.
Lien Waivers, And Releases
Lien waivers help prevent legal claims against the property and project funds. Your contract should specify when and how lien waivers must be provided and what they must include. In Illinois, the Mechanics Lien Act requires certain notice and filing procedures. By requiring properly executed lien waivers as a condition of payment, you reduce the risk of future claims.
Indemnification Clause
This clause shifts risk between parties. If your subcontractor’s work causes damage or injury, who is liable? An indemnification clause should state whether your business is protected and to what extent. In Illinois, these clauses are enforceable but must be clearly stated and consistent with 740 ILCS 35/1 et seq., the Construction Contract Indemnification for Negligence Act.
Dispute Resolution Clause
Litigation can be costly. Including a clause that outlines how disputes will be resolved—whether through mediation, arbitration, or litigation—can help save time and money. In some cases, we recommend mandatory mediation or arbitration as a first step, especially for smaller disputes. You can also specify the location and jurisdiction of any legal proceedings.
Force Majeure Clause
A force majeure clause defines what happens if a project is delayed due to circumstances beyond your control, like severe weather, supply chain interruptions, or labor strikes. These clauses became especially important during the COVID-19 pandemic. Your contract should explain which events qualify, what notice is required, and how those delays impact deadlines or penalties.
Termination Clause
It’s important to outline how the contract can be terminated and what happens afterward. Can the contract be ended for convenience or only for cause? What notice must be given? What happens to work already completed or materials purchased? This clause helps limit financial risk if a project needs to stop.
Insurance Requirements
Clearly define what types of insurance must be maintained during the project—general liability, builder’s risk, workers’ compensation, etc., and at what coverage levels. Your contract should require proof of insurance before work begins and require all subcontractors to meet the same standards.
Retainage Clause
Retainage refers to withholding a portion of payment until work is fully completed and accepted.
Illinois law allows retainage but limits how much can be withheld. Under 770 ILCS 60/21.02, retainage should not exceed 10%, and that amount must decrease as the project nears completion. This clause gives you leverage while protecting subcontractors from unreasonable delays in payment.
Frequently Asked Questions About Construction Contracts In Illinois
What Happens If The Scope Of Work Is Unclear In A Construction Contract?
When the scope of work is vague, it opens the door for disputes about what was promised versus what was delivered. Courts in Illinois look at the written contract, attached documents, and the conduct of the parties. If it’s not clearly stated, you may be required to complete additional work without compensation or face a breach of contract claim.
Are Verbal Change Orders Enforceable In Illinois?
Verbal change orders can be enforced in some cases, but they are much harder to prove. Illinois courts generally prefer written agreements. Most contracts include a clause stating that all changes must be in writing. Without that documentation, it becomes your word against the other party’s.
Can I Include Penalties For Late Completion In My Construction Contract?
Yes, you can include liquidated damages clauses to address late completion. However, they must
be reasonable and not punitive. Illinois courts may refuse to enforce penalties that appear excessive or are not based on actual estimated losses. A well-drafted clause can encourage timely performance while withstanding legal scrutiny.
What Are The Risks Of Using A Generic Contract Template?
Generic contracts often lack important details and fail to comply with Illinois-specific laws. They may also include outdated or unenforceable clauses. Using a template without legal review can expose your business to unnecessary liability, missed deadlines, or payment issues. We always recommend customizing your contracts to the specific project and parties involved.
Do I Need A Lawyer To Draft A Construction Contract In Illinois?
Technically, no—but it’s highly advisable. Illinois construction law is complex, and a single mistake in a contract can lead to costly disputes. As business attorneys focused on construction law, we help ensure your contracts are legally sound, enforceable, and customized to your business goals.
Call The Business Law Group To Protect Your Business With Better Construction Contracts
At The Business Law Group, we help construction businesses across Chicago build stronger contracts that minimize risk and prevent future disputes. From drafting new agreements to reviewing existing ones, we make sure your contract terms reflect your priorities and comply with Illinois law.
If you’re managing a construction project or subcontractor relationships in Illinois, we can help. Contact our Chicago construction disputes attorneys at the Business Law Group by calling (224) 353-6498 to receive your free consultation. Let us help you stay protected—because we’re The Chicago Business Lawyers®, and your business matters to us.
The information contained in these blog entries and on this website does not constitute legal advice. While the content discusses various legal issues, it is not intended to and does not provide legal advice. If you are seeking legal advice, you should contact the Business Law Group at 224-353-6498 to schedule a consultation.
