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By the A2 Insider Editorial Team
Hiring a contractor can be one of the most expensive—and risky—decisions a business owner makes. In Michigan, a poorly written construction agreement can expose property owners to lawsuits, unpaid subcontractor liens, insurance disputes, and months of project delays.
Whether you are renovating a retail storefront, upgrading office space, or managing a commercial build-out in Ann Arbor, Michigan, the protection often comes down to a few critical lines buried deep in the contract.
Below are three legal clauses that construction attorneys say business owners should understand before signing any contractor agreement.
1. Indemnification Clauses: Who Pays When Something Goes Wrong?
Indemnification language determines who is financially responsible when accidents or damages occur on a job site.
In many contractor agreements, indemnification clauses shift liability away from the contractor and toward the property owner.
Where the Risk Appears
If the clause is written broadly, a business owner could be responsible for:
Injuries to subcontractors
Property damage caused by construction crews
Third-party claims related to the project
Michigan courts generally enforce contract language as written, which means a single paragraph could shift tens of thousands of dollars in liability to the property owner.
What Business Owners Should Look For
Attorneys often recommend language requiring the contractor to indemnify the owner for damages arising from the contractor’s negligence or work activities.
Without that protection, the owner may become the default financial backstop if litigation occurs.
2. Insurance Verification: The Certificate Trap
Contractors frequently provide a Certificate of Insurance (COI) as proof of coverage. While these documents appear official, they do not always guarantee protection for the property owner.
The key issue is whether the owner is listed as an “additional insured.”
The Common Mistake
Many business owners assume that seeing a certificate means they are covered. In reality, the certificate often only confirms the contractor’s policy exists.
Without additional insured status, the contractor’s insurer may decline to defend the owner if a claim arises.
Best Practice
Before work begins, owners should verify that:
Their business is listed as an additional insured
The contractor carries general liability coverage
Policy limits are appropriate for the size of the project
For larger commercial projects, attorneys sometimes recommend requesting copies of the policy endorsements, not just the certificate.
3. The Lien Waiver Problem
Michigan’s construction law allows subcontractors and suppliers to file a construction lien against a property if they are not paid—even if the owner already paid the general contractor.
This means a property owner could face two payment demands for the same work.
The Scenario
The owner pays the contractor.
The contractor fails to pay subcontractors.
The subcontractor files a lien against the property.
Under Michigan Construction Lien Act, the lien can remain in place until the dispute is resolved or the debt is satisfied.
The Protection: Lien Waivers
A properly structured payment process should require signed lien waivers from contractors and subcontractors before releasing funds.
There are typically two forms:
Partial lien waivers for progress payments
Final lien waivers once work is complete
Without these documents, business owners risk discovering lien claims long after the project ends.
Why These Clauses Matter for Ann Arbor Businesses
Construction activity across Ann Arbor, Michigan has increased as commercial buildings adapt to new retail, office, and mixed-use demands tied to growth from the University of Michigan and surrounding tech employers.
With more renovation and build-out projects underway, contract disputes involving:
payment issues
insurance coverage
subcontractor claims
have become more common.
Understanding a few key contract provisions before signing can dramatically reduce the legal exposure facing business owners.
Local Legal Perspective
A2 Insider periodically features licensed professionals who specialize in construction law, commercial contracts, and business risk management.
Professionals interested in contributing expert insight to future articles may contact our editorial team.
Editorial Disclaimer
This article is for informational purposes only and does not constitute legal advice. Michigan construction law and contract requirements may change, and outcomes depend on specific project circumstances. Readers should consult with a qualified attorney before signing construction agreements or releasing project funds. Comments for this article have been disabled.
