In construction field, subcontractors are firms that work for the principal contractors. Usually, they have specialized skills or machines that the contractors don’t have or maybe the business model is such that, as the main contractor, you outsource all of your work. This is the main reason you hire a subcontractor. If you’re planning to hire a subcontractor for your project, then you need to draft a subcontractor agreement.
Subcontractor Agreement Templates
What is a subcontractor agreement?
A subcontractor agreement is a document that exists between you as the contractor who hires a subcontractor to help you with the completion of a service or project. In the construction business, you as the contractor is the one who holds a contract for services with a client.
In turn, you have to choose subcontractors to complete all or part of the tasks needed to complete your client’s project. A typical agreement with a subcontractor must outline all of the liabilities, responsibilities, and duties of the subcontractor including other terms or conditions that you both agree upon.
The benefit of this agreement
Although it seems like making a subcontractor agreement has the intention of protecting yourself as the contractor. But the fact is, this document is more beneficial for the subcontractor you will hire.
This agreement is an official document that defines the timeline, work scope, and other relevant information related to your project. When the subcontractor already knows all this information, they can use the document as protection because they can prove what you had both agreed upon if anything goes south.
How to write a subcontractor agreement?
A subcontractor agreement template usually contains several clauses with each of the sections written in concise, professional language. The writing of the subcontract agreement format terms should be very clear so as to avoid any confusion or ambiguities that might happen in the future.
This clarity ensures legal protection for all of the parties agreeing to the terms in the subcontractor agreement. Here are the steps for writing a subcontractor contract:
- Project Scope
This section of the agreement defines the work necessary and the whole project. It includes the demands of the client, the responsibilities of the subcontractor, and your expectations as the contractor.
- Completion Timing
Included in the agreement is the additional time that you will allot for subcontractors to complete their work. The inclusion of a deadline that is well before your own deadline ensures that you will still get enough time to evaluate the work that the subcontractor has performed. The assurance of quality work gives you and the client peace of mind.
- Billing and Payment Details
This section specifies the payments that the subcontractor receives for their work. You will base the payments on the subcontractor’s scope of work. In case the subcontractor requires more time to finish all of their tasks, the contract should include details about any extensions or additional payments.
- Independent Contractor Notice
Legal protection is always preferred to appear in writing. The inclusion of this clause allows you to identify your subcontractor and note their responsibility to handle payments and tax deductions.
- Non-Disclosure Agreement
This is the section of the contract that defines the information that you and the subcontractor you hire must keep confidential. There are some projects where the details cannot get discussed or shared publicly. As such, you need to include this clause in the agreement you give to the subcontractor.
- Non-Compete Clause
Including this section in the agreement ensures that the subcontractor does not violate any local or state laws in terms of competing with you as the contractor. This is a very crucial part of the agreement as it prevents the subcontractor from doing anything unethical like stealing work or clientele from you as their hiring contractor.
- Work for Hire Inclusion
The inclusion of this section makes it clear that all of the work done belongs to the client or to you as the hiring contractor. It clarifies that the subcontractor will get a specific payment amount for their work and that they will sign the rights to any work over to you or the client.
- Insurance for Accidental Damages Responsibilities
Regarding insurance issues, you may or may not possess insurance that covers the errors, mistakes or any accidental damage caused by the subcontractor. If you have insurance, then you need to include the details here. If not, this insurance clause must clarify the insurance responsibilities of the client.
- Assignment Permissions and Restrictions
This part of the agreement allows you to define certain restrictions and permissions that the subcontractor has, in terms of hiring other people to help them accomplish their work. It is not unusual for you to put limits on your hired subcontractor as this prevents the line of work responsibilities from getting spread too thin.
- Indemnity Clause
This section of the agreement ensures protection against you. For instance, when you have completed the project and something goes wrong that was the subcontractor’s responsibility, the presence of this clause in the contract can be a means for the client to recover losses.
However, if the error is something that you’re responsible for, then you cannot hold the subcontractor responsible. As such, you won’t have any legal means of collection.
This section must include any promises that you make to the subcontractor and vice versa.
Steps for hiring a subcontractor
When you need a subcontractor, you must follow certain steps to hire one. Remember that you would only have to hire a subcontractor if you don’t have the skills or manpower to perform certain tasks to accomplish your project. Apart from the subcontractor agreement, follow these steps:
- Describe the scope of work that your subcontractor will have within your project. This will make things clearer from the beginning.
- After specifying the scope of work, it’s time to reach out to potential candidates for your project. Send them the details of the project so they can determine if they want to work with you.
- If you have several candidates interested, you can have a bidding process wherein they will send you proposals for you to make the best choice.
- Once you have chosen a subcontractor to work with, create the subcontractor agreement form and present it to them.
- Finalize your agreement by signing the document you have made. Create a payment schedule so the subcontractor can start working.