How to Write a Subcontractor Contract
Determine the scope of the work the subcontractor will do., Estimate time for completion of the work., Decide who will provide materials and when they will be delivered., Discuss payment methods and terms., Consider what should happen in the event...
Step-by-Step Guide
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Step 1: Determine the scope of the work the subcontractor will do.
Both parties must have an understanding of the specific work to be done, and how it will fit in with the contractor's existing schedule and deadlines.
Both parties also should have a clear understanding of what the subcontractor is capable of doing, particularly within whatever time constraints are presented by the project. -
Step 2: Estimate time for completion of the work.
The general contractor and subcontractor need to work together to come up with a realistic expectation of how long it will take to finish the job, taking into consideration any excusable delays such as rain that might slow completion.
As the general contractor, you should make sure that the subcontractor's deadlines are well before your deadlines laid out in your master contract.
That way you can be sure that if anything happens, or if the subcontractor doesn't do the job according to specifications, you have time to correct the problem., If the subcontractor needs separate materials to complete her part of the project, she and the general contractor must decide whether she or the general contractor are responsible for purchasing those materials.
Often the subcontractor will be responsible for providing her own materials, but in some cases particular materials may have already been purchased to conform to the wishes of the property owner., Agree upon the total amount the general contractor will pay the subcontractor, then decide when and how it will be paid. , If the general contractor plans to pass on to the subcontractor any costs or penalties included in his contract, this should be discussed.
As a subcontractor, you shouldn't agree to a general contractor's form agreement without discussing or negotiating the provisions.
Keep in mind that the standard form agreement a general contractor uses was drawn up to his benefit.
If you feel uncomfortable or pressured, have an attorney or even another contractor look over the agreement and provide their opinion on whether it's fair.Decide what to do if changes to the work or schedule for the project must be made.
Both parties should agree on what changes will be allowed within the scope of the agreement, how much notice should be provided of changes, and when the subcontractor is entitled to an extension of time for changes to the work., Open the agreement by providing the individual names of the two people signing the agreement, as well as business names if applicable.
Include contact information such as addresses and phone numbers for both the general contractor and the subcontractor.
Include the legal status of all parties.
For example, if the general contractor is an LLC, but the subcontractor is a sole proprietor, these business entities should be identified in the contract.
How each party is organized to do business potentially alters their liability under the contract.The initial part of the contract also should mention the project the subcontractor is being hired to work on and reference the master or prime contract.In this section you also may want to define the relationship of the parties and clarify that the subcontractor is an independent contractor and not an employee of the general contractor.If the subcontractor will be bringing in other workers to help complete her portion of the work under the contract, include a statement that they are her employees, not employees of the general contractor., Provide a description of exactly what the subcontractor is expected to do for the general contractor.
You want these descriptions to be as specific as possible, because these clauses put the subcontractor on notice as to the contractor's expectations.
Try to cover as many contingencies as you can think of.
If the property owner doesn't like the subcontractor's work, the contract should make it clear under what circumstances the subcontractor is expected to come back and fix it to the owner's expectations.For example, if the subcontractor completes the kitchen cabinets and countertops to the property owner's specifications, but the property owner later decides he wants marble countertops, the contract should state whether it is the subcontractor's responsibility to come back and remove the countertops he installed, or to install the new marble ones, and whether he gets any additional payment for this work. , If you've agreed that specific parties will be responsible for inspections or for completion of any prerequisites, those should be included in the contract.
For example, you might want to make it clear in the contract that the subcontractor is providing her own worker's compensation insurance and liability insurance that meets the legal requirements in your state.As a general contractor, you should consider including a clause that preserves your right to inspect the subcontractor's work at any time and ensure it conforms with the specifications both of the subcontractor agreement and your master contract., Place the subcontractor's work into the context of the general contractor's overall schedule and provide deadlines for each phase of work to be completed.
Specify the rate of pay in the contract and create milestones for payment.
For example, if you are going to pay the subcontractor $2,000 to paint the house you're building, you might pay $500 for every 25 percent of the house that's painted.Rather than specific milestones, you may pay the subcontractor a set amount each week, or make weekly payments provided a certain number of hours are worked or a certain amount of work is completed.Typically you will list the total payment amount, and then provide the schedule of payments to be made throughout the project as percentages of that total.Consider including a clause making time of the essence, and penalizing the subcontractor for any delays caused by the subcontractor's failure to adhere to the schedule required by the general contractor., The subcontractor typically warrants her work against defects in material or craftsmanship for a number of years, and holds the general contractor harmless from claims or losses connected to the work she performs.Typically the subcontractor will warrant that she will provide quality work in a professional manner, that she and her employees have the level of skill and experience required to complete the task, and that all of her work will conform to the overall project specifications.Indemnification clauses shouldn't be one sided.
If the subcontractor indemnifies the general contractor against claims or losses from her work, the general contractor should likewise indemnify the subcontractor.Although it is typical for a subcontractor to assume any damages or penalties related to her work specifically, she should be on the lookout for any "pass-through" clause in which the general contractor seeks to pass on the liability for all of the general contractor's requirements or obligations under the master contract.Likewise, subcontractors should avoid signing broad indemnity clauses that impose liability on them for all claims and damages, even those caused by the general contractor's own negligence., Typically, the subcontractor agreement can be terminated by the general contractor for the same reasons the owner can terminate the master or prime contract.
If such a clause is used, the master contract should be attached as an exhibit to the subcontractor's contract and incorporated by reference.Include the effective dates of the contract, along with a final date for completion of the project., Nearly every contract includes clauses known as "boilerplate provisions," which cover issues such as what state's law governs the contract and where a lawsuit for breach of contract can be filed.
These clauses are referred to as "miscellaneous" or "boilerplate" because they apply to nearly any contract regardless of the substance.
For example, the agreement may include a clause that the parties agree to submit to mediation or binding arbitration in the event of a contract breach or dispute., Both the subcontractor and the general contractor must sign the agreement for it to be legally binding and enforceable. -
Step 3: Decide who will provide materials and when they will be delivered.
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Step 4: Discuss payment methods and terms.
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Step 5: Consider what should happen in the event of a breach of contract.
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Step 6: Identify the parties.
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Step 7: Define the scope of work to be done.
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Step 8: List the rights and duties of each party.
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Step 9: Create work completion and payment schedules.
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Step 10: Provide warranty and indemnity clauses.
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Step 11: Provide methods by which the contract can be terminated.
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Step 12: Include any necessary miscellaneous provisions.
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Step 13: Sign your agreement.
Detailed Guide
Both parties must have an understanding of the specific work to be done, and how it will fit in with the contractor's existing schedule and deadlines.
Both parties also should have a clear understanding of what the subcontractor is capable of doing, particularly within whatever time constraints are presented by the project.
The general contractor and subcontractor need to work together to come up with a realistic expectation of how long it will take to finish the job, taking into consideration any excusable delays such as rain that might slow completion.
As the general contractor, you should make sure that the subcontractor's deadlines are well before your deadlines laid out in your master contract.
That way you can be sure that if anything happens, or if the subcontractor doesn't do the job according to specifications, you have time to correct the problem., If the subcontractor needs separate materials to complete her part of the project, she and the general contractor must decide whether she or the general contractor are responsible for purchasing those materials.
Often the subcontractor will be responsible for providing her own materials, but in some cases particular materials may have already been purchased to conform to the wishes of the property owner., Agree upon the total amount the general contractor will pay the subcontractor, then decide when and how it will be paid. , If the general contractor plans to pass on to the subcontractor any costs or penalties included in his contract, this should be discussed.
As a subcontractor, you shouldn't agree to a general contractor's form agreement without discussing or negotiating the provisions.
Keep in mind that the standard form agreement a general contractor uses was drawn up to his benefit.
If you feel uncomfortable or pressured, have an attorney or even another contractor look over the agreement and provide their opinion on whether it's fair.Decide what to do if changes to the work or schedule for the project must be made.
Both parties should agree on what changes will be allowed within the scope of the agreement, how much notice should be provided of changes, and when the subcontractor is entitled to an extension of time for changes to the work., Open the agreement by providing the individual names of the two people signing the agreement, as well as business names if applicable.
Include contact information such as addresses and phone numbers for both the general contractor and the subcontractor.
Include the legal status of all parties.
For example, if the general contractor is an LLC, but the subcontractor is a sole proprietor, these business entities should be identified in the contract.
How each party is organized to do business potentially alters their liability under the contract.The initial part of the contract also should mention the project the subcontractor is being hired to work on and reference the master or prime contract.In this section you also may want to define the relationship of the parties and clarify that the subcontractor is an independent contractor and not an employee of the general contractor.If the subcontractor will be bringing in other workers to help complete her portion of the work under the contract, include a statement that they are her employees, not employees of the general contractor., Provide a description of exactly what the subcontractor is expected to do for the general contractor.
You want these descriptions to be as specific as possible, because these clauses put the subcontractor on notice as to the contractor's expectations.
Try to cover as many contingencies as you can think of.
If the property owner doesn't like the subcontractor's work, the contract should make it clear under what circumstances the subcontractor is expected to come back and fix it to the owner's expectations.For example, if the subcontractor completes the kitchen cabinets and countertops to the property owner's specifications, but the property owner later decides he wants marble countertops, the contract should state whether it is the subcontractor's responsibility to come back and remove the countertops he installed, or to install the new marble ones, and whether he gets any additional payment for this work. , If you've agreed that specific parties will be responsible for inspections or for completion of any prerequisites, those should be included in the contract.
For example, you might want to make it clear in the contract that the subcontractor is providing her own worker's compensation insurance and liability insurance that meets the legal requirements in your state.As a general contractor, you should consider including a clause that preserves your right to inspect the subcontractor's work at any time and ensure it conforms with the specifications both of the subcontractor agreement and your master contract., Place the subcontractor's work into the context of the general contractor's overall schedule and provide deadlines for each phase of work to be completed.
Specify the rate of pay in the contract and create milestones for payment.
For example, if you are going to pay the subcontractor $2,000 to paint the house you're building, you might pay $500 for every 25 percent of the house that's painted.Rather than specific milestones, you may pay the subcontractor a set amount each week, or make weekly payments provided a certain number of hours are worked or a certain amount of work is completed.Typically you will list the total payment amount, and then provide the schedule of payments to be made throughout the project as percentages of that total.Consider including a clause making time of the essence, and penalizing the subcontractor for any delays caused by the subcontractor's failure to adhere to the schedule required by the general contractor., The subcontractor typically warrants her work against defects in material or craftsmanship for a number of years, and holds the general contractor harmless from claims or losses connected to the work she performs.Typically the subcontractor will warrant that she will provide quality work in a professional manner, that she and her employees have the level of skill and experience required to complete the task, and that all of her work will conform to the overall project specifications.Indemnification clauses shouldn't be one sided.
If the subcontractor indemnifies the general contractor against claims or losses from her work, the general contractor should likewise indemnify the subcontractor.Although it is typical for a subcontractor to assume any damages or penalties related to her work specifically, she should be on the lookout for any "pass-through" clause in which the general contractor seeks to pass on the liability for all of the general contractor's requirements or obligations under the master contract.Likewise, subcontractors should avoid signing broad indemnity clauses that impose liability on them for all claims and damages, even those caused by the general contractor's own negligence., Typically, the subcontractor agreement can be terminated by the general contractor for the same reasons the owner can terminate the master or prime contract.
If such a clause is used, the master contract should be attached as an exhibit to the subcontractor's contract and incorporated by reference.Include the effective dates of the contract, along with a final date for completion of the project., Nearly every contract includes clauses known as "boilerplate provisions," which cover issues such as what state's law governs the contract and where a lawsuit for breach of contract can be filed.
These clauses are referred to as "miscellaneous" or "boilerplate" because they apply to nearly any contract regardless of the substance.
For example, the agreement may include a clause that the parties agree to submit to mediation or binding arbitration in the event of a contract breach or dispute., Both the subcontractor and the general contractor must sign the agreement for it to be legally binding and enforceable.
About the Author
Teresa Torres
Teresa Torres has dedicated 4 years to mastering lifestyle and practical guides. As a content creator, Teresa focuses on providing actionable tips and step-by-step guides.
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