Illinois Construction Contracts Guide & FAQs

Need contract help? Put a team of legal experts in your corner.

Learn more
IllinoisContractsHero

Illinois Construction Contracts Overview

Illinois Construction Contracts


  • Private Jobs
  • Public Jobs

A construction contract outlines each party’s obligations, rights, and remedies on a project. But although the language in specific contract clauses is typically negotiable, Illinois has certain rules that govern what the agreement must include — and what is prohibited.

Keep in mind that, while Illinois’ rules for construction contract terms are written into state law, the courts determine how strictly those laws should be interpreted — and those interpretations can change.

On this page, you’ll find resources, legal information, and answers to frequently asked questions about Illinois’ construction contract and payment terms requirements.

Illinois construction contract provisions

While Illinois generally allows construction parties to set the terms of their agreement, there are some laws that regulate specific types of contract provisions. Any contract clause that contradicts the law is invalid and unenforceable.

“No lien” clauses

The use of no-lien clauses that waive the right to file a lien is specifically prohibited under Illinois law, as such rights cannot be waived prior to the performance of work or furnishing of materials to the project under 770 ILCS 60/1(d). But keep in mind, that lien rights may be subordinated under certain circumstances, which may produce a similar effect.

Contingent payment clauses
There are two types of contingent payment clauses: pay-if-paid and pay-when-paid, both of which are enforceable in Illinois, with a caveat.

If the pay-if-paid clause explicitly states that payment from the owner or higher-tiered party is a condition precedent to payment, then it will be enforceable. However, such clauses cannot be used as a defense to mechanics lien or bond claims, only claims arising under the contract itself.

Pay-when-paid clauses are also enforceable but merely as a timing mechanism to payment within a reasonable time. The underlying obligation to pay still remains.

• See: Pay-When-Paid Contracts Distinguished from Pay-If-Paid in Illinois

Payment timing clauses

On private projects in Illinois, the payment deadlines under the prompt payment act may not be altered. Payments from owners must be made within 15 days of approval (allowing up to 25 days to approve the invoice). Additionally, all other payments to subs and suppliers must be made within 15 days of receipt of payment. All late payments are subject to interest penalties at a rate of 10%/year.

On public projects in Illinois, there are separate requirements for state projects and local government projects. On state projects, the prompt payment deadlines are strict, payments by the public entity must be made within 60 days (30 days for approval, and 30 days for payment) of the receipt of a pay application. All other payments to subs and suppliers must be made within 15 days calendar days or 10 business days of receipt; whichever is later. These payment deadlines may not be modified by contract.

On local government projects, payments from the public entity must follow the same time frame as state projects, a 30-day approval period, and 30 days after approval to make payment. However, under 50 ILCS 505/6, the timing of these types of payment may be modified to a greater time period. All other payments to subs and suppliers need to be made within 15 days of receipt of payment; this cannot be modified by contract.

*Note: It is unclear if the prompt payment statutess may be waived, as Illinois does allow certain statutory rights to be waived by individuals. Best practice is to review the terms of the contract to ensure there is no such waiver language.

Retainage limits

Any contract provisions attempting to increase the amount of retainage on private projects in Illinois will be invalid, as the amount of retainage is strictly capped at 10% of each progress payment. Upon 50% completion, the amount is required to be reduced to just 5% of all remaining payments.

*Note: It is unclear if the retainage statutes may be waived, as Illinois does allow certain statutory rights to be waived by individuals. Best practice is to review the terms of the contract to ensure there is no such waiver language.

However, retainage on public works projects is generally unregulated in Illinois. Therefore, the terms of the contract will dictate the amount of retainage that can be withheld, and any potential for reduction or early release.

Illinois construction contract requirements

Illinois law doesn’t require any specific information to be included in a general construction contract. However, if the contract involves residential property over $1K, there are some requirements under the IL Home Repair & Remodeling Act.

First and foremost, prior to the execution of the contract, a Consumer Rights Brochure must be provided to the homeowner to sign, acknowledging its receipt. Once the brochure has been provided, the written contract must include the total costs (including parts, materials, and any charges for the estimate) and the contractor’s business name and address. Also, if the contract includes an arbitration agreement or waiver of the right to trial by jury, the owner must be notified of their presence and must be able to accept or reject by writing so next to the provision along with their signature.

Construction Contracts FAQs in Illinois

Construction contracts and payment terms are highly regulated in Illinois. It can be confusing to figure out when payments must be made, how to make them, and how to best protect your company from expensive problems. Here are some frequently asked questions that come up with construction contracts and payment terms on Illinois jobs

Illinois Construction Contracts FAQs

Can you waive lien rights by contract in Illinois?

No, Illinois specifically prohibits the use of “no-lien clauses” to waive the right to file a lien prior to performing work or furnishing materials under 770 ILCS 60/1(d), as against public policy.

However, it’s important to note that case law has suggested that liens may be subordinated by agreement; subject to some limitations.

• For more, see: When Advance Waiver Not Allowed, Subordination By Contract Might Do the Same Thing

Do I need a written contract to file an Illinois mechanics lien?

No, generally speaking, there is no explicit requirement to have a written contract to file an Illinois mechanics lien. There is one exception.

• See: To file a lien, does there need to be a contract?

On residential projects over $1000, a general contractor must have a written contract with the property owner in order to have lien rights under the Illinois Home Repair and Remodeling Act.

How does Illinois treat pay-if-paid and pay-when-paid clauses?

Both pay-if-paid and pay-when-paid clauses are enforceable in Illinois.

Pay-if-paid clauses are enforceable if the language is clear and unambiguous and explicitly states that payment from the higher-tiered party is a condition precedent to payment.

However, they are only enforceable pursuant to claims under the contract. Thus, the clause cannot be used as a defense to mechanics lien claims, liens on funds, or payment bond claims. –Brown & Kerr Inc. v. St. Paul Fire & Marine Ins.

Illinois Pay-if-Paid Clauses- A Breakdown

Pay-when-paid clauses are also enforceable but are treated merely as timing provisions requiring the contractor to pay the sub within a reasonable amount of time.

Pay-When-Paid Contracts Distinguished from Pay-if-Paid in Illinois

Are no-damages-for-delays clauses enforceable in Illinois?

Yes, no-damages-for-delay clauses are enforceable in Illinois but they are strictly construed against the party seeking its benefit and subject to several exceptions. These include delays:

    • Caused by bad faith, fraud, concealment, misrepresentation, or acts of hindrance;
    • Not within the contemplation of the parties (i.e. not reasonably foreseeable at the time the contract was entered into);
    • Are of an unreasonable duration; or
    • Attributable to inexcusable ignorance or incompetence or another party.

Bates & Rogers Constr. v. North Shore Sa. Dist

Can you contract around Illinois’ prompt payment terms?

Private projects

The timing of payments under Illinois’ private prompt payment laws is fairly strict and doesn’t appear to be subject to modification. Payments from owners must be made within at least 15 days after approval of the invoice. (considered approved after 25 days of receipt of the invoice). Once received, payments down the payment chain must be made within 15 days.

* It is unclear if prompt payment rights may be waived, as individuals in Illinois may waive statutory rights under certain circumstances. 

Public projects

The timing of payments on public works projects in Illinois varies depending on whether the project is commissioned by the state or a local government entity.

On local/municipal projects payments by the entity must be made within either 30 days from receipt of invoice, or when the goods/services are received; whichever is later. Once received, payment to subs/suppliers must be made within 15 days.

• Note, however, the timing of payments from the entity to the original contractor may provide for a greater time period under 50 ILCS §505/6.

On state projects, the timing of payments cannot be modified. The public entity must approve the pay app within 30 days of receipt, and pay within 60 days of approval. Once received, payments to sub/suppliers must be made within 10 business days or 15 calendar days; whichever is earlier.

* It is unclear if prompt payment rights may be waived, as individuals in Illinois may waive statutory rights under certain circumstances. 

Can you contract around Illinois' retainage requirements?

Private projects

On private projects in Illinois, the amount of retainage that can be withheld is capped at no more than 10% until the project reaches 50% completion of the contract. After which, the amount must be reduced to no more than 5% of the remaining payments. The language of the statute doesn’t suggest that this can be modified.

* It is unclear if prompt payment rights may be waived, as individuals in Illinois may waive statutory rights under certain circumstances. 

Public projects

Retainage on public projects is not regulated in Illinois. Thus, the amount withheld will be determined by the terms of the contract.

Does Illinois have any specific requirements for construction contracts?

There are no specific requirements regarding construction contracts in general. However, when the contract is over $1K and involves a residential property, there are quite a few requirements under the Home Repair & Remodeling Act.

First and foremost, prior to the execution of the contract, if the agreement contains an arbitration clause or a waiver of a jury trial, the owner must be notified and can either accept or reject each by writing the accept/reject and signing next to each provision.

As far as the actual contract itself, it must be in writing and state the total costs, any charges for the estimate, and the contractor’s business name & address. A copy of the IL Consumer Rights Brochure and the right of senior citizens (65+) to cancel the contract within 15 business days of signing.

Lastly, if the contract is for repairs following damaging weather, the contract must also include the roofing contractor’s license number, a statement notifying the owner of the right to cancel, and an attached Notice of Cancellation.

How long do I have to bring a breach of contract claim for nonpayment in Illinois?

The statute of limitations (deadline) to file a breach of contract claim for nonpayment in Illinois varies depending on whether the contract was written or oral.

For written contracts, a claim for breach of contract must be initiated no later than 10 years from the date of the alleged breach.

• 735 ILCS §5/13-206

For oral/implied contracts a claim for breach of contract must be initiated no later than 5 years from the date of the alleged breach.

735 ILCS §5/13-205

Need More Help with Illinois Construction Contracts? We're Here.

Ask an expert for free

Check out our payment experts
Construction attorneys: Courtney Stricklen, Christopher Ng, Andrea Goldman, and Peter Ryan

Recent Questions About Illinois Construction Contracts

What Rights Do I Have

I'm trying to find information. I hired a contractor to do a roof and gutters. The job was botched and every time it rains my...

In Il. What warrantees does a buyer have in purchasing a new construction if they don't use a construction contract?

I am a real estate agent whose client purchased a new construction townhome in Skokie Il, which was completed when the clients bought it. We...

Garage and Property Law

I had a garage built on my property. It has been a nightmare. I signed the contract in August of 2020. They knocked the old...

How to file a lien in Illinois

Need to file a Illinois mechanics lien? File your mechanics lien with Levelset, the lien experts quickly and easily. Or you can follow the 3 steps below to file a lien yourself with Levelset's free information.
File with the Mechanics Lien Experts
We’re the Mechanics Lien experts. With us it’s fast, easy, affordable, and done right!
File Now

Want to Learn More about How Illinois Contractors Pay?
Barrow General Contractors
Rating 5.0
C
Payment Score
75 / 100
View
Aggregate Industries
Rating 5.0
B
Payment Score
84 / 100
View
W.B. Olson, Inc
Rating 5.0
C
Payment Score
75 / 100
View
Dick's Sporting Goods
Rating 4.9
A
Payment Score
85 / 100
View
See other Lists of Contractors and How to Best Work With Them

Free Illinois Construction Contract Templates

Download customizable Illinois construction contract templates for different project types, prepared by construction attorneys, construction attorneys, and payment experts, available to you for free.

Equipment Rental Agreement Template

This customizable equipment rental agreement template is for equipment rental companies who want to ensure payment on their construction projects. This simple, straightforward rental agreement...

Get Form Now

Time and Material Contract Template

If you are supplying time or materials to any construction project, it’s essential to get everything in writing. This five page contract template is simple...

Get Form Now

Roofer Contract Template

Who says a construction contract for roofers has to be a long, complicated document? Certainly not us! This simplified yet thorough roofer contract template should...

Get Form Now

Drywall Contract Template

Just like every other member of the construction industry, drywall contractors can have problems communicating with other contractors and subs, as well as recovering payment...

Get Form Now

Construction Contract Template

Who says construction contracts have to be long, complicated documents? Certainly not us! This simple contract template comes in at a whopping 3 pages! Remember:...

Get Form Now

Subcontractor Agreement Template

Who says your subcontractor agreement has to be a long, complicated document? Certainly not us! Our subcontractor agreement template is simple to use, easy to...

Get Form Now

Material Supply Agreement Template

Who says your material supply agreement has to be a long, complicated document? Certainly not us! This simplified Material Supply Agreement should more than do...

Get Form Now

Helpings Thousands of Illinois Contractors with Construction Contracts and Payment Terms