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How to review construction contracts with AI: owner, GC, and subcontractor positions on the same clauses, a state snapshot of pay-if-paid rules, anti-indemnity statutes, delay, and retainage.
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Construction lawyers know the feeling of opening a subcontract, finding the words "incorporated herein by reference," and realizing the real contract is a prime agreement nobody sent over. Payment risk, indemnity risk, and delay risk all flow downhill on a construction project, and the subcontractor stands at the bottom of the hill.
The work is also unusually local. A payment clause that a Georgia court will enforce can be void in California, so a good review combines the contract language, the project's state, and the documents the contract pulls in by reference.
The short answer: The best AI tool for reviewing construction contracts applies your positions on payment, indemnity, delay, and retainage to the draft, lets you ask questions about the prime contract and riders alongside the subcontract, and returns redlines in Word. Gavel Exec does this as a Microsoft Word add-in: you open the subcontract, attach the prime contract to the chat, run a playbook written for your side of the deal, and get tracked-change redlines with the reasoning for each change.
Many construction contracts start from industry forms. The American Institute of Architects (AIA) publishes the A201-2017 General Conditions and the A401-2017 contractor-subcontractor agreement, which incorporates the A201 by reference (AIA Contract Documents). AIA has said the A201 is scheduled for its next update in 2027. ConsensusDocs publishes the ConsensusDocs 200 owner-constructor agreement and the ConsensusDocs 750 constructor-subcontractor agreement, both revised in 2023 (ConsensusDocs catalog). Owners and general contractors rarely sign these forms as published. They add riders and supplementary conditions, and that is where payment, indemnity, and delay terms usually change.
Owners, general contractors, and subcontractors read the same clauses with opposite goals. A playbook should be written for one side, and the table shows how each side typically approaches the clauses that carry the most risk.
| Clause | Owner | General contractor | Subcontractor |
|---|---|---|---|
| Payment | Pay against approved applications with documented progress | Pay subcontractors after the owner pays, where state law allows a condition precedent | Owner payment affects timing only, with payment due within a set number of days regardless |
| Retainage | 10% held until final completion | Mirror the owner's retainage on each subcontract | Lower retainage, reduced at 50% completion and released when the subcontractor's own scope is accepted |
| Indemnity | Broadest form the state allows | Flow the owner's indemnity down to subcontractors | Limited to the subcontractor's own negligence |
| Delay | No damages for delay, with time extensions only | Pass delay risk down and keep its own claims against the owner | Compensation for delay caused by the owner or contractor, with workable notice periods |
| Liquidated damages | A daily rate with no cap | Pass through to whichever subcontractor caused the delay | A cap, and liability only for delay the subcontractor causes |
| Flow-down | Full flow-down of the prime contract | Full flow-down to every subcontract | Flow-down limited to provisions that apply to the subcontractor's scope, with the prime contract provided |
| Lien waivers | Unconditional waivers with each payment | Waivers from every tier before releasing funds | Conditional waivers tied to payment actually received |
A pay-if-paid clause makes the owner's payment to the general contractor a condition precedent to the contractor's payment to the subcontractor. A pay-when-paid clause only sets the timing, and the contractor must still pay within a reasonable time if the owner does not (ABA). States treat risk-shifting clauses very differently:
| State | Treatment of pay-if-paid | Source |
|---|---|---|
| California | Void as against public policy | Wm. R. Clarke Corp. v. Safeco (1997) |
| New York | Void when it makes owner payment a condition precedent; clauses that only fix timing are permitted | West-Fair Electric v. Aetna (1995) |
| North Carolina | Unenforceable by statute | N.C. Gen. Stat. § 22C-2 |
| Wisconsin | Unenforceable by statute | Wis. Stat. § 779.135 |
| Virginia | Prohibited in contracts entered into on or after January 1, 2023, with an exception on private projects for owner insolvency | Va. Code § 2.2-4354 and § 11-4.6 |
| Georgia | Generally enforced when the condition precedent is stated clearly | Case law |
| Florida | Generally enforced when clear; ambiguous clauses are read as setting a reasonable time for payment | Case law |
Always confirm the current rule for the governing law and the project location before relying on a snapshot.
A 50-state survey updated in May 2026 identifies 45 states with construction anti-indemnity statutes (MWL). Broad form indemnity, which covers a loss even when the indemnitee was solely negligent, is the form most commonly prohibited. Intermediate form covers losses where the indemnitee was partly negligent. Limited form covers only the indemnitor's own negligence and is permitted everywhere. Reviewers should also check that additional insured requirements do not try to accomplish what the statute prohibits.
Courts generally enforce these clauses but recognize exceptions for bad faith or active interference, delays the parties did not contemplate, delays long enough to amount to abandonment, and fundamental breach (ConsensusDocs). Ohio voids clauses that waive liability for delay caused by the owner or contractor (Ohio Rev. Code § 4113.62(C)), and Washington and Kentucky have similar statutes.
Retainage is typically 5 to 10 percent, and many states cap it (Bradley). California limits retention on public works contracts to 5 percent (Pub. Contract Code § 7201), and the cap flows down to subcontracts. Nearly every state has a prompt payment law for public projects, and many also cover private projects.
Picture in-house counsel at a mechanical subcontractor in California. An estimator sends her a subcontract for a hospital expansion at 9 a.m., and the bid is due the next morning. The general contractor's prime contract with the owner comes as a separate attachment.
She opens the subcontract in Word, attaches the prime contract to the chat, and runs her company's subcontractor playbook in Gavel Exec. The payment rule fails because the clause makes owner payment a condition precedent, which she knows California courts will not enforce, so she redlines it to a timing provision and keeps the negotiation simple. The indemnity covers the general contractor's sole negligence, and the claims section gives her company three days to give notice of a delay. Then she asks Exec which provisions of the prime contract the subcontract flows down to the mechanical scope. The answer points her to a liquidated damages provision in the prime contract that the subcontract never mentions.
The estimator has the marked-up subcontract and a short summary by mid-afternoon, with time to price the liquidated damages exposure into the bid.
A large project can have a prime contract, a dozen subcontracts, and a stack of change orders, each one amending the last. Construction lawyers increasingly want AI that reads the whole project file together and answers questions like "which subcontracts carry the owner's liquidated damages?" or "which change orders extended the schedule?" Today the practical approach is to attach the prime contract and the relevant change orders to each review and ask those questions one subcontract at a time.
Open the subcontract or rider in Word, attach the prime contract to the chat, and run a playbook for your role: owner, general contractor, or subcontractor. Ask about flow-down obligations and notice deadlines. Each finding links to the clause it relies on, and each proposed redline shows a priority level and its reasoning. Teams can generate a playbook from their own templates and guidelines with AI Playbooks. Gavel Exec is SOC 2 Type II certified, and Gavel has zero data retention agreements with its large language model (LLM) providers.
Related reading: a step-by-step guide to AI contract review in Microsoft Word.
For lawyers who negotiate subcontracts and riders in Microsoft Word, a Word-native tool such as Gavel Exec applies a construction playbook, answers questions about the prime contract attached to the chat, and proposes tracked-change redlines. Construction management platforms suit teams whose priority is tracking payment applications and change orders during the project.
A pay-if-paid clause makes the owner's payment a condition precedent to paying the subcontractor. A pay-when-paid clause only sets the timing. California, New York, North Carolina, Wisconsin, and Virginia refuse to enforce risk-shifting clauses.
Generally yes, with exceptions for bad faith or active interference, uncontemplated delays, unreasonably long delays, and fundamental breach. Some states, including Ohio, restrict them by statute.
Broad form indemnity requires the indemnitor to cover losses even when the indemnitee was solely negligent. Most states with construction anti-indemnity statutes prohibit it.
Yes. Gavel Exec reviews AIA and ConsensusDocs forms, riders, and supplementary conditions in Microsoft Word. The most useful review focuses on the modifications, since that is where the risk usually changes.
This article provides general information and is not legal advice. Construction law varies by state, and the rules summarized here may change.
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