Things to Keep in Mind with Subcontractor Agreements

Subcontractors are an important part of the construction process. If you are hiring a subcontractor or working as a subcontractor, you will need to have a contract in place to ensure your interests and rights are protected. This guide will tell you how to create an effective subcontractor agreement template to have those protections in place.

The details we will cover below include:

• The Basics of a Subcontractor Contract
• Unique Considerations for Subcontractor Contracts
• Subcontractor Contract Clauses
• Do’s and Don’ts for Subcontractor Contracts
• Additional Resources
• Getting Your Subcontractor Contract Signed

Subcontractors are unique because they typically get hired by the main contractor overseeing a project. So they are therefore responsible to both the contractor and the main client. Some of the parts that a subcontractor contract template should include are:

• Scope of the work
• Deadlines and timelines
• Payment details and responsibility
• Location where the work will happen
• Provision of materials needed
• Insurance coverage
• Warranty on work

Subcontractor contracts are unique because they are often between a general contractor and the subcontractor. The general contractor is usually working under a contract with the main client. Sometimes, therefore, the subcontractor contract may name the client as well as the general contractor, and this creates some unique considerations.

Each clause of a subcontractor contract template needs to be clear and understandable. Here are some that you’ll want to include:

• Indemnity Clause – This clause, which needs to follow your state’s laws, will protect the subcontractor from being held liable if the work creates loss, damages, or a lawsuit. With this clause in place, the hiring entity agrees to absorb the losses caused by the subcontractor.
• Workforce Clause – This clause places the responsibility of providing the necessary workforce on the shoulders of the appropriate party, usually the subcontractor. This protects the contractor from having to look for workers and ensures the subcontractor gets to use the workers they desire.
• Termination Clause – A termination clause states when and how the contract can be terminated by all parties.
• Payment Clause – Clearly define the terms of payment, price, and procedures.
• Change Orders Clause – This clause outlines how changes to the order requests can be made. It is important because it protects the subcontractor from sudden changes they do not agree to but also because it provides a way for the contractor to ask for changes as the work progresses.
• Insurance Clause – This clause states who is responsible for any applicable insurance, such as liability and workers’ compensation insurance, during the duration of the contract.
• Dispute Resolution Clause – Because subcontractor contracts involve three parties, the subcontractor, the contractor, and the client, disputes can happen easily. This clause states how they will be resolved and whether or not the subcontractor will continue working during the dispute.

As you customize a subcontractor contract template, keep these tips in mind:

• Do mirror the subcontractor/contractor contract with the contractor/client contract. This will prevent any miscommunications.
• Don’t leave the deadlines open-ended. Be clear about when the work will get done and how extensions can happen.
• Do make sure the contract clearly states what party the subcontractor reports to, whether that is the general contractor or the client.
• Don’t make the contract hard to understand, which may make it hard to enforce.
• Do collect a signature from all named parties. Consider usingNitro Sign to do so securely.
• Don’t leave payment terms unclear. Make sure the full scope of the work and the way the subcontractor gets paid are both clear.

Here are some resources to help you learn about the intricacies of subcontract contracts:

• Tips for Drafting an Effective Subcontractor Agreement
• 9 Tips for an Effective Subcontractor Agreement
• 7 Things You Must Know Before Entering Into a Subcontractor Agreement

Before a subcontractor contract template can be legally binding, it must be signed. Nitro Sign makes sending and signing contracts safe, secure, and simple. Sign up for a free trial to use this service for your subcontractor agreement template.