A construction project may be governed by multiple agreements. While the client signs the contract and works directly with the general contractor, the contractor, in turn, can outsource their work to separate subcontractors. In this case, it’s better to create a subcontractor agreement to ensure all parties understand their obligations, rights, and expectations.
What is a subcontractor agreement?
A subcontractor agreement is a formal contract that legally binds a general contractor and subcontractor, defining a specific part of work within a larger construction project. It ensures that both parties are clear on the scope of work, payment terms, timelines, and quality expectations. This type of agreement is mostly used in construction projects.
Such an agreement is independent of the main contract signed between the client and the general contractor. So, a subcontractor agreement is the only document that describes the duties, rights, responsibilities, and expectations of the subcontractor. This independence means that the subcontractor's direct legal and financial relationship is with the general contractor, not with the client.
However, it’s important to note that while the subcontractor agreement is independent of the main contract, it is often influenced by the main contract's terms. For example, subcontractor agreements typically must adhere to the conditions and standards set forth in the main contract between the client and the general contractor.
How do I write a subcontractor agreement?
When drafting a subcontractor agreement, precision and clarity are essential. Here’s a step-by-step approach to creating an effective agreement:
- Define the scope of work. Describe the project and the services the subcontractor will provide.
- Find the subcontractor. Visit specialized websites that offer different subcontractors with reviews. Alternatively, you can use recommendations from trusted sources. After that, contact a couple of them to begin the bidding process and find the one that fits your needs.
- Write an agreement using our subcontractor agreement template.
- Sign the agreement for a subcontractor to begin their work.
Key components of a subcontractor agreement
A subcontractor agreement doesn’t need to be lengthy or overcomplicated; however, here’s what needs to be included:
- Contact information for the parties involved—clearly state the full names, addresses, and contact details of both the contractor and the subcontractor.
- Scope of work – describe the tasks for a subcontractor to perform, the deliverables, and the deadlines.
- Payment terms – include comprehensive details on the preferred payment type, whether fixed price, hourly rates, retainers, payment schedules, or any other structure that fits your needs.
- Project duration – outline the start and end dates for the services provided, conditions, and expectations.
- Legal requirements – highlight any necessary licenses, insurance, and adherence to laws and regulations.
- Dispute resolution – define the detailed procedures in case a disagreement arises.
- Termination clause – mention the terms and conditions where it is allowed to terminate the contract before the completion date, with associated fees, if any.
- Signature and date – both the contractor’s and subcontractor’s signatures are required to bind the agreement legally.
What is an example of a subcontract?
A general contractor hires a plumbing firm for a housing project under a construction subcontractor agreement. This agreement must specify the plumbing work, timelines, and payment details, ensuring the subcontractor’s tasks align with the project’s overall objectives and deadlines.
The difference between employee and subcontractor
Contractors often choose subcontractors over permanent employees in order to avoid the expenses associated with permanent employees.
Here are the key differences between a subcontractor and an employee:
- Benefits – unlike employees, the subcontractors are not eligible for healthcare packages, paid time off, retirement benefits, etc.
- Tools and materials – qualified subcontractors typically do not require additional equipment.
- Training – subcontractors are expected to possess a specific set of skills, and the contractor does not need to provide any additional training prior to the start of the project.
- Tax withholding – unlike permanent employees,the contractor is not responsible for filing and paying the subcontractor’s taxes.
Subcontractor Agreement Sample
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* The template here is provided for reference only, and you should always talk to a professional for all legal matters
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