A general contractor sends down a subcontract. It runs forty pages. The sub signs it, because that’s how the job gets awarded, and because arguing about paragraph 14.3 isn’t how anybody wins work.
Several of those paragraphs are unenforceable in Minnesota, and no amount of signing changes that.
Chapter 337 is short, blunt, and almost entirely made of the words void and unenforceable. You want to know it on both sides of the contract. A clause you’re relying on may not exist, and a clause you agreed to may not bind you.
What counts as a “building and construction contract”?
Minn. Stat. § 337.01, subd. 2 draws the line:
“Building and construction contract” means a contract for the design, construction, alteration, improvement, repair or maintenance of real property, highways, roads or bridges.
And it carves out production equipment, which is the exception people forget:
The term does not include contracts for the maintenance or repair of machinery, equipment or other such devices used as part of a manufacturing, converting or other production process, including electric, gas, steam, and telephone utility equipment used for production, transmission, or distribution purposes.
Design is in. Architects and engineers are inside chapter 337, not outside it. Servicing a production line is out. A facility contract that mixes both has to draw that line on purpose.
1. Broad-form indemnity is void
Minn. Stat. § 337.02 is one sentence, and it governs a very large share of construction litigation:
An indemnification agreement contained in, or executed in connection with, a building and construction contract is unenforceable except to the extent that: (1) the underlying injury or damage is attributable to the negligent or otherwise wrongful act or omission, including breach of a specific contractual duty, of the promisor or the promisor’s independent contractors, agents, employees, or delegatees; or (2) an owner, a responsible party, or a governmental entity agrees to indemnify a contractor directly or through another contractor with respect to strict liability under environmental laws.
Read “except to the extent.” It isn’t all-or-nothing. Minnesota permits fault-based indemnity. You may agree to indemnify for harm attributable to your own wrongdoing, and that of your subs, agents, employees, and delegatees. What you can’t do is agree to indemnify someone for their negligence.
A few details matter more than they look:
- “[I]ncluding breach of a specific contractual duty.” The trigger isn’t limited to negligence. A promisor’s breach of a specific contractual duty supports indemnity too, which is why a well-drafted scope of work is also an indemnity document.
- “Indemnification agreement” includes the duty to defend. Section 337.01, subd. 3 defines it as an agreement “to indemnify, defend, or hold harmless the promisee against liability or claims of liability for damages arising out of bodily injury to persons or out of physical damage to tangible or real property.” Notice the subject-matter limit: bodily injury and physical property damage. Purely economic loss is a different analysis.
- “Promisee” is broader than the party you signed with. Subdivision 4: “‘Promisee’ includes that party’s independent contractors, agents, employees or indemnitees.”
2. Additional-insured coverage for someone else’s negligence is void
This is the provision that catches sophisticated parties, because it shut down the workaround that broad-form indemnity bans had produced everywhere: if I can’t make you indemnify me for my negligence, I’ll make you insure me for it.
Minn. Stat. § 337.05, subd. 1(a) starts out permissive. Chapter 337 “do[es] not affect the validity of agreements whereby a promisor agrees to provide specific insurance coverage for the benefit of others.”
Then paragraph (b) shuts the door:
A provision that requires a party to provide insurance coverage to one or more other parties, including third parties, for the negligence or intentional acts or omissions of any of those other parties, including third parties, is against public policy and is void and unenforceable.
What survives, and this list is your drafting roadmap. Paragraph (c) preserves provisions requiring a party to provide or obtain:
- workers’ compensation insurance;
- construction performance or payment bonds;
- builder’s risk policies;
- owner- or contractor-controlled insurance programs (OCIPs and CCIPs); and
- project-specific insurance for claims arising out of the promisor’s negligent acts or omissions, or those of the promisor’s independent contractors, agents, employees, or delegatees.
Paragraph (d) also preserves a requirement that the promisor insure the promisee’s vicarious liability, or liability imposed by warranty, arising out of the acts or omissions of the promisor.
Paragraph (e) is a real oddity: paragraph (b) “does not apply to building and construction contracts for work within 50 feet of public or private railroads, or railroads regulated by the Federal Railroad Administration.” Railroad-adjacent work is outside the ban. If you’re bidding trackside, read your insurance obligations as though chapter 337 doesn’t protect you. As to this provision, it doesn’t.
3. Out-of-state choice of law and forum clauses are void
Minn. Stat. § 337.10, subd. 1:
Provisions contained in, or executed in connection with, a building and construction contract to be performed in Minnesota making the contract subject to the laws of another state or requiring that any litigation, arbitration, or other dispute resolution process on the contract occur in another state are void and unenforceable.
Both halves matter, and the arbitration reference is the big one. A national contractor’s form that sends every dispute to arbitration in Texas under Texas law doesn’t do that for work performed in Minnesota. The statute reaches “litigation, arbitration, or other dispute resolution process” by name.
The trigger is where the work is performed, not where the parties are or where the contract was signed.
4. Lien and bond-claim waivers signed before payment are void
Minn. Stat. § 337.10, subd. 2:
Provisions contained in, or executed in connection with, a building and construction contract requiring a contractor, subcontractor, or material supplier to waive the right to a mechanics lien or to a claim against a payment bond before the person has been paid for the labor or materials or both that the person furnished are void and unenforceable.
There’s one important limit, in the same subdivision: “This provision shall not affect the validity of a waiver as to any third party who detrimentally relies upon the waiver.”
So a blanket up-front waiver in the subcontract is void between the parties. A lien waiver a title company or lender actually relied on is a different question. That’s why conditional waivers, tied to actual receipt of payment, are the right instrument, and why collecting unconditional waivers before funding is a problem for everyone in the chain.
Lien rights themselves are governed by chapter 514, and their deadlines are unforgiving in a way chapter 337 isn’t. See our Minnesota mechanic’s lien timeline.
5. Prompt payment is deemed into the contract whether or not you wrote it
This one isn’t a prohibition. It’s an implied term, and it comes with interest and mandatory fees. Minn. Stat. § 337.10, subd. 3:
A building and construction contract shall be deemed to require the prime contractor and all subcontractors to promptly pay any subcontractor or material supplier contract within ten days of receipt by the party responsible for payment of payment for undisputed services provided by the party requesting payment … The contract shall be deemed to require the party responsible for payment to pay interest of 1-1/2 percent per month to the party requesting payment on any undisputed amount not paid on time.
Then come the three provisions that give it teeth:
- A minimum penalty. “The minimum monthly interest penalty payment for an unpaid balance of $100 or more is $10.” Below $100, the actual penalty due.
- Mandatory fee-shifting. “A party requesting payment who prevails in a civil action to collect interest penalties from a party responsible for payment must be awarded its costs and disbursements, including attorney fees incurred in bringing the action.”
- A right to stop work. “If an undisputed payment is not received within ten days, the prime contractor or subcontractor of any tier that has not received the undisputed payment may suspend work under the building and construction contract until the undisputed payment is received.”
The word that carries all of it is undisputed. Pay-when-paid arguments, backcharges, and disputed change orders are the whole battlefield here. Both sides should understand that calling an amount disputed is a decision with consequences. Get it wrong as the payer, and you’ve got 1.5% per month plus the other side’s legal bill plus a lawful work stoppage.
What to do about it
If you’re a subcontractor or supplier:
- Don’t assume the indemnity clause means what it says. Under § 337.02 it reaches only harm attributable to your wrongful act or omission and that of your subs, agents, employees, and delegatees.
- Read the insurance article against § 337.05, subd. 1(b). A requirement that you name the GC as an additional insured for the GC’s own negligence is void, unless the work is within 50 feet of a railroad.
- Ignore the Texas forum clause for Minnesota work, including an out-of-state arbitration clause. Then get advice before you act on that, because how you assert it matters.
- Never sign an unconditional lien waiver before you’re paid. It’s void between you and the contractor, but not necessarily against a third party who relied on it.
- Calendar ten days on every undisputed payment, and know that the statute gives you interest, fees, and the right to suspend.
- Keep the mechanic’s lien clock separate. Chapter 337 doesn’t extend it.
If you’re an owner or general contractor:
- Draft fault-based indemnity, tracking § 337.02’s language, including “breach of a specific contractual duty.” It’s enforceable, and it covers more than most people realize.
- Use the § 337.05(c) and (d) list. It’s a menu of what you can still require: OCIP/CCIP, builder’s risk, bonds, project-specific coverage for the promisor’s own negligence, and coverage for your vicarious and warranty liability arising out of the promisor’s acts.
- Delete out-of-state law and forum provisions from your Minnesota forms. An unenforceable clause is worse than none. It invites a threshold fight you’ll lose.
- Move conditional waivers, not unconditional ones, and tie them to funding.
- Decide “disputed” carefully and in writing. That word carries 1.5% per month and a mandatory fee award.
- Remember the machinery carve-out. Section 337.01, subd. 2 puts production-equipment maintenance outside all of this, which changes the analysis on an industrial site.
What every one of these clauses has in common
Every clause chapter 337 voids has the same shape, and so does the slow pay its implied payment term overrides: a party with bargaining power shoving the consequences of its own conduct onto a party who needs the work. Indemnify me for my negligence. Insure me for my negligence. Sue me in my home state. Waive your lien before I pay you. Pay your subs whenever I get around to paying you.
The Legislature didn’t respond by regulating the negotiation. It took those terms off the table entirely, so there’s nothing to negotiate about. Then, in subdivision 3, it wrote a payment term into every construction contract in the state whether the parties wrote one or not.
So the sub who signed the forty-page subcontract without leverage got most of what a lawyer would have negotiated for. Not because they read it. Because the statute did.
Madgett Law, LLC advises Minnesota owners, contractors, subcontractors, and suppliers on construction contract terms, indemnity and additional-insured obligations, prompt-payment and retainage disputes, and mechanic’s lien and payment bond claims. If somebody’s asserting a clause against you, the first question is whether chapter 337 already voided it. Send us a message or call 612-470-6529.
Sources: Minn. Stat. § 337.01 (definitions — subd. 2, “building and construction contract” and the manufacturing, converting, production process, and utility equipment exclusion; subd. 3, “indemnification agreement,” including the duty to defend and its limitation to bodily injury and physical damage to tangible or real property; subd. 4, “promisee”); Minn. Stat. § 337.02 (unenforceability of certain agreements; the fault-based exception including breach of a specific contractual duty; the environmental strict liability exception); Minn. Stat. § 337.05 (agreements to insure — subd. 1(a), validity of agreements to provide specific insurance coverage; subd. 1(b), provisions requiring coverage for another party’s negligence or intentional acts void as against public policy; subd. 1(c), preserved requirements including workers’ compensation, performance and payment bonds, builder’s risk, owner- or contractor-controlled insurance programs, and project-specific insurance for the promisor’s negligence; subd. 1(d), vicarious and warranty liability; subd. 1(e), the exception for work within 50 feet of railroads; subd. 2, indemnification for breach of an agreement to insure); Minn. Stat. § 337.10 (prohibited provisions — subd. 1, out-of-state choice of law and out-of-state litigation, arbitration, or other dispute resolution for contracts to be performed in Minnesota; subd. 2, pre-payment waivers of mechanics lien and payment bond claims, and the third-party detrimental reliance limit; subd. 3, the deemed ten-day prompt payment term for undisputed amounts, interest of 1-1/2 percent per month, the $10 minimum monthly penalty on balances of $100 or more, mandatory costs and attorney fees to a prevailing claimant, and the right to suspend work; subd. 4, progress payments and retainages) (Minnesota Office of the Revisor of Statutes). Retainage requirements under § 337.10, subd. 4 are detailed and should be reviewed separately for any specific project. This article is general legal information about Minnesota law, not legal advice, and reading it does not create an attorney–client relationship. No outcome is promised or implied.