Let’s Be Honest—Most Contractors Aren’t Thinking About This
You’re focused on getting jobs done, keeping clients happy, and managing your crew. Legal risks? Paperwork? Probably not at the top of your list.
But here’s the truth: The fastest way to lose money in contracting isn’t a slow season—it’s a legal mistake.
One bad contract, unpaid invoice, or missing permit can wipe out weeks (or months) of hard-earned profit. And yet, most contractors don’t take this stuff seriously—until they’re in the middle of a legal mess, scrambling to fix a problem that could have been avoided.
So, before that happens, let’s go through the seven biggest legal mistakes that could cost you money, clients, or even your entire business.
1. You Don’t Have a Strong Contract for Every Job
Why It’s a Problem:
Too many contractors work off of handshake agreements, text messages, or basic invoices. That’s fine—until something goes wrong.
A client refuses to pay. The project scope suddenly “changes.” There’s a dispute over who was responsible for a mistake.
Without a clear, legally binding contract, you have zero leverage.
How to Fix It:
Use a real contract, not a generic one you found online. Make sure it covers payment terms, project scope, and dispute resolution. Get it signed before work starts—verbal agreements don’t hold up in court.
2. You’re Letting Clients Pay on Their Own Timeline
Why It’s a Problem:
If you’re not requiring deposits and enforcing due dates, you’re basically letting clients decide when (or if) they pay you. That’s a fast track to cash flow problems.
How to Fix It:
Require at least 30-50% upfront—clients who resist are red flags. Set clear payment schedules (not just “due on completion”). Make payments easy—digital options, auto-reminders, and late fees help.
3. You Don’t Have a System for Change Orders
Why It’s a Problem:
Client requests start small—a different paint color, a new fixture, an extra room added to the project. Before you know it, the entire scope of work has changed—but you’re still locked into the original price.
How to Fix It:
Require all changes to be documented in writing (and signed off by the client). Adjust pricing and deadlines accordingly—every change affects the timeline. Never do additional work without an approved change order.
4. Your Insurance Isn’t Enough (Or Worse, You Have None)
Why It’s a Problem:
One injury, one accidental property damage claim, one subcontractor mistake—if you’re not properly insured, you’re personally on the hook.
And yes, clients can and will sue you.
How to Fix It:
Carry general liability insurance—this is non-negotiable. Make sure subcontractors have their own coverage (or you’ll be responsible). If you have employees, workers’ comp is essential.
5. You’re Not Pulling the Right Permits
Why It’s a Problem:
Skipping permits might seem like a shortcut, but if an inspector catches it (or worse, a client reports you), you’re looking at:
Fines Project shutdowns Legal liability for future property issues
How to Fix It:
Always confirm permit requirements before starting any job. Don’t let clients pressure you to cut corners—if something goes wrong, it’s on you. Track permit approvals so there are no surprises mid-project.
6. Your Subcontractors Could Get You in Legal Trouble
Why It’s a Problem:
If a sub messes up, who does the client come after? You.
If a sub gets injured, who could be held responsible? You.
If a sub doesn’t get paid, who do they file a lien against? You.
How to Fix It:
Use written agreements with every subcontractor—covering payments, liability, and scope. Ensure subs have their own insurance—so their mistakes don’t become your financial problem. Keep records of all subcontractor payments and agreements.
7. You’re Not Keeping Track of Your Legal Paperwork
Why It’s a Problem:
You need proof to protect yourself—contracts, permits, change orders, invoices, payment receipts, client approvals. If you’re not keeping records, you have nothing to back you up in case of a dispute.
How to Fix It:
Keep organized, digital copies of all contracts, estimates, and payments. Track client communication—especially approvals, changes, and complaints. Ensure all paperwork is clear, professional, and legally enforceable.
Protect Yourself Now—Before It’s Too Late
Most legal mistakes aren’t obvious until you’re already in a bad situation. But once you’re dealing with:
A client refusing to pay A job getting shut down over a permit issue A lawsuit from an accident or mistake
…it’s too late to wish you’d done things differently.
The best contractors protect themselves upfront—not after disaster strikes.
Want an easy way to keep contracts, payments, and legal documents in order? There’s a tool for that.
