Legal Traps Contractors Learn Only After Losing Money

Theme: Legal Framework; Module: Law & Contracts

Author: Dr. Pradeep Reddy Sarvareddy

Published Date: 27 Jan 2026

Most Contractors lose money in Projects for the same reasons.  Yet, Contractors keep on repeating such mistakes more confidently and new Contractors start their career by committing the same mistakes.  It is like saying you don’t become a Contractor unless you make these mistakes at least once.  Let us change that.  The reason Contractors lose money is because the Contractor is focussed on the Work.  So, let us stop for a moment and understand what happened.  You know these common legal traps.  Become “enlightened” by these experiences, and most likely you will remember these lessons next time and, instead of losing money, you could earn money.

Contractors often lose millions not because of bad work, but because of hidden legal traps.  Some are in your Contract, others in legal statutes and others are based on practice.  Some common legal traps that Contractors fall into and end up losing cases, and sometimes, even the opportunity to file a case, are as follows:

  1. Notices: If you don’t send the required Notice on time, your claims may not be allowed. Note that even one day of delay sometimes cannot be allowed by Law.
  2. Verbal Instructions: Verbal instructions don’t count. How can you prove a verbal Contract? If it’s not signed, you may never get paid for that work.  So, the moment you receive verbal instruction, document it and ask for a Supplementary Agreement or something like that.
  3. Interest and Legal Costs Aren’t Guaranteed: Sometimes, you may end up paying lot more towards Courts fee, Advocates Fees or other costs. Even if you win the case, there is no guarantee that you will recover interest on your Claims or these Costs. You can file a case even for Rs. One (yes Sir, One Rupee only).  But, think of all the legal costs.  So, be prudent.  Most times, it is good to walk away from small disputes and focus on your business.
  4. Shared Delays: Sometimes, delays are caused by both the Contractor and the Department. In such cases, you may not get extra payment for the delayed work. At most, you may be eligible for an Extension of Time.  So, never sleep on your Work.  If the Department is delaying, document the Delays, show that there is no delay from your side and immediately ask for compensation.  Just saying that there is a delay without any quantified Claim amount may not be accepted.
  5. Force Majeure Is not a Free Pass: Force Majeure usually refers to the act of God or something else like that which is not in your hands, and your Contract may include more details. But if you don’t act diligently, issue notices and try to mitigate the losses, Force Majeure may end up hurting you. Remember the Covid lockdown?  Did you get extra money during the lockdown period?
  6. Three-Year Time Limit Isn’t Always After the Final Bill: Most disputes have a 3-year limitation period for filing claims, but it doesn’t always start after the final bill. It can begin from the date of breach, also known as cause of action. This is a complex trap that catches many contractors off guard.  There is a big misconception that after the Final Bill, you can file case within 3-years.  Not always and not for every Claim.  Know the law.
  7. What Counts as Evidence? Many people don’t understand Evidence. Based on movies, they feel like some kind of forensic report or videos are only Evidence.  But understand that everything including Letters, emails, progress reports and even meeting notes can be evidence.  But, they have to contain proper details including who wrote that, if it was shared with the other side, and of course the content and context of the Evidence.  Start building your evidence as events happen.  Contemporaneous records win cases.  Better safe than sorry.

Remember, every Rule has an exception.  Good people know the Rules.  Great people work their magic based on the exception.