Subcontractor Agreement Template
A subcontractor agreement is a formal, legally binding agreement between a contractor and subcontractor. It is an excellent way to boost your business as a contractor or subcontractor. The contractor benefits because they can delegate certain tasks to a subcontractor. A subcontractor usually specializes in a particular niche, which makes them valuable to a contractor. Subcontracting has become a more familiar practice across several industries. Contractors, sometimes referred to as general contractors, utilize subcontractor agreements to protect themselves and the subcontracts they hire.
A thorough subcontractor agreement is an essential part of your business. It leaves little room for confusion with what is expected of both parties to the contract. The most common agreement we think of when we hear subcontractor agreement is for construction. However, other industries utilize subcontractor agreements. Hiring a subcontractor can mitigate project risks while reducing costs.
What is in the Subcontractor Agreement Template?
- Fillable sections to detail services to be performed (Scope of Work)
- Option to customize based on the industry and/or project
- Spaces to include compensation, payment terms, and competition deadlines
- Clear and concise language
- Remedies in the event of a breach
Important Terms in a Subcontractor Agreement:
- Contractor – An individual or business that hires a subcontractor to help with a certain project.
- Subcontractor –Subcontractors are individuals or businesses that are awarded a part or all of an existing contract to perform the obligations of a contractor’s agreement with another. They are similar to independent contractors as they are responsible for paying their own self-employment taxes.
Difference Between Contractor and Subcontractor
Contractors work to obtain and complete contracts. Contractors hire subcontractors when they need help with a job or project. The contractor oversees the operation. Subcontractors only work on a contractual basis under the contractor.
A simple way to illustrate the difference between a contractor and a subcontractor is to think of the contractor as the “head coach” of a football team. The subcontractors are the “players.” Both parties are working towards a common goal, and the “head coach” is overseeing the performance of the players. Each “player” under the “head coach” specializes in a particular position like the quarterback or receiver. Each “player” and their roles play an integral part in the team’s overall success.
Who Can Benefit from Using a Subcontractor Agreement?
A subcontractor agreement spells out clear and legally applicable language to clarify which party is responsible for what task. The contract details the scope of work and what is expected under the contract. For example, a contractor owns a website design business, and one of their clients has hired them for a large project that requires a coding specialist and a website programmer. The contractor may want to hire specialized subcontractors that focus on those areas. So, the subcontractors would be the coding specialist and website programmers. A few industries and/or individuals that benefit the most by using a subcontractor agreement include:
- Independent Contractors Hiring Subcontractors
- Small Business Owners
- Entrepreneurs, Sole Proprietors, Corporations, and Limited Liability Corporations (LLC)
- Construction Contractors
What are the Important Elements of a Subcontractor Agreement?
A subcontractor agreement may vary based on the contractor’s needs and project. However, here are a few basic elements to a subcontractor agreement:
- Parties to the agreement
- Effective Date
- Scope of Work – This is the biggie! This contract provision clearly defines the contractor’s expectations of the subcontractor and their deliverables. If a client is less than thrilled with the subcontractor’s work, the agreement should include whether or not the subcontractor is responsible for making revisions to the client’s satisfaction.
- Completion Date – It is essential to explicitly state the project’s deadline. If there is not a “deadline,” the contract should specify that the work is performed on an “as needed” basis.
- Payment Terms – The terms should expressly note if the pay is on a set at an hourly rate and how many hours should be dedicated each week or month to the project. If the payment is a fixed rate, the amount should be listed along with any due dates for remittance of the payment.
- Insurance – The agreement should indicate which party is responsible for obtaining what type of insurance. Insurance required typically includes general liability insurance (“CGL” which provides and indemnifies claims for property damage and bodily injury) workers’ compensation insurance, and automotive insurance.
- Indemnification Clause – An indemnity clause establishes which party would be responsible for providing compensation for a loss, damage, or injury arising from the project. This clause protects a contractor from being sued by your client if the subcontractor made a mistake “hold harmless.” States have different laws on indemnification clauses and their reach. It is important to seek legal advice about your state’s rules and local laws on indemnification provisions.
- Warranty – A warranty provision is a subcontractor’s guarantee of quality work and that the services are free from certain defects due to faulty workmanship for a certain period of time after the completion of the project.
- Assignment Provision – This establishes whether or not a subcontractor is permitted to assign their responsibilities under the agreement to another party. Subcontractor contracts usually restrict subcontractors from assigning their agreement to outside parties.
- Dispute Resolution – Should a dispute should arise, a subcontractor agreement should spell out the legal remedies each party may have. The first step in an effort to resolve a dispute is usually through a good faith negotiation. However, if the dispute cannot be resolved, the parties can agree to other legal remedies such as mediation or binding arbitration. Should all attempts fail to reach a resolution, the parties can agree to pursue action in the courts.
Common Mistakes to Avoid when Drafting a Subcontractor Agreement
A subcontractor agreement should be thorough. A well-drafted subcontractor agreement can help prevent a headache down the road. A subcontractor agreement should be presented before the subcontractor begins work on the project. This ensures that the parties have reviewed the scope of the contract and have agreed to its terms. Here are a few common mistakes found when drafting a subcontractor agreement:
- Review of the Master Agreement – The master agreement is the contract between the contractor and their client. The contractor should refer to the Master Agreement and confirm it allows subcontractors. The contractor must ensure that the Master agreement allows for subcontractors.
- Deadlines – Contractors should be mindful of the deadlines made between themselves and their clients. It is a good idea to set the subcontractor’s deadline in advance of the actual deadline to allow time for your review and to permit time for any revisions if necessary.
- Scope of Work, Services, and Materials – The services that the subcontractor is to perform should be clearly defined. It should be as unambiguous as possible so that both parties to the agreement have a complete understanding of the expectations. If the contractor is responsible for providing any materials or equipment, such should be included in the agreement to avoid a potential dispute down the road.
- Insurance – Insurance coverage is a crucial element of a subcontractor agreement. The agreement should list the minimum insurance required under the contract to designate which party is responsible for what and who may carry the liability.
- Commercial General Liability – this type of insurance is typically required before performing a great deal of work. This type of insurance is required under most subcontracts. The insurance protects the contractor from any damage to property or injuries sustained while on the job. The coverage typically extends to the services or work performed by subcontractors.
- Workers’ Compensation – This type of insurance should be mentioned because of the risk of injury. This is mostly seen in construction contracts but may also cover the subcontractor’s employees.
- Commercial Auto insurance – If a contractor or subcontractor uses a personal or company vehicle to transport themselves or suppliers, the insurance is necessary. It may be required under the agreement depending on the job.
- Professional Liability – This type of insurance protects the parties against human error that occurred during a project.
- Legal Remedies – The parties should be aware of what rights they have if there is a breach of contract. The dispute resolution is a key element of the subcontractor agreement. It also establishes which party is entitled to attorney’s fees if the dispute should escalate past the negation stage.
How to Customize your Subcontractor Agreement
A subcontract agreement will vary based on the industry, project, and scope of work. A subcontractor agreement can be paired with a non-disclosure agreement (NDA) to protect the contractor’s client from any disclosure of confidential information. Since each state has different laws, it is important to consult with an attorney to review the terms listed in the agreement.
Electronic Signatures Expedite the Process
Electronic signatures modernize the way agreements are signed. Subcontractors are not always local, so having the document ready to e-sign is the fastest way to get the ball rolling. Time is of the essence when performing work for a client, and since e-signatures are legally binding, you are ready to get started as soon as the other party signs. ApproveMe.com streamlines your company’s process and improves productivity.
A subcontractor agreement can be sent along with other legal documents including a non-disclosure, non-compete, or other agreement to knock out the paperwork so you can get started and not have to worry about chasing down the documents later to ensure they were signed.
Other Resources for Your New Venture
While you’re hard at work laying the foundation for your new business, getting your name out there can be quite the challenge. Here are a few key resources that can help get your brand noticed:
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THIS SUBCONTRACTOR AGREEMENT (“Agreement”) is being made between ____________________ (“Subcontractor”) located at______________________________________________________and ____________________ (“Contractor”) located at _______________________________________________________ on this _____ day of ______, 20___.
IN CONSIDERATION OF the Subcontractor performing the services and Contractor paying for such services described herein, the Parties agree to the following:
a. Beginning on __________________, 20____, Subcontractor agrees to perform the services described on Annex “A” attached hereto (hereinafter referred to as the “Services”).
b. The Subcontractor shall provide shall furnish the materials and equipment described on Annex “B” attached hereto.
No alterations shall be made to the Services described in the plans and specifications, except upon the written order of the Contractor or the Owner. The Contractor may, at any time, by written order, make changes in the plans and specifications, which changes shall be evidenced by “change orders” signed by the Contractor and accepted by the Subcontractor.
Contractor agrees to pay the Subcontractor _________________ for the Services performed under this Agreement.
Total Cost of Services
Amount Due on Signing
Amount Due on Competition
Additional Costs (if applicable)
Final payment for the Services performed under this Agreement shall be made within _______ days of competition. Payments must be made to the Subcontractor by credit card, money order, check, or any other approved method of payment accepted by the Subcontractor. Payments must be mailed to:
The Subcontractor shall complete the services by ________ [a.m./p.m.] on or before ___________, ____20___. Time shall be of the essence in the Subcontractor’s performance of this Agreement.
a. This agreement shall automatically terminate when the Services are completed as defined in this Agreement and all payments have been received pursuant to this Agreement.
b. If either Party fails to fulfill their obligations under this Agreement, including, but not limited to, unperformed or incomplete services, non-payment for completed services, abandonment of the project, the non-breaching Party may terminate the Agreement for the breach. The non-breaching Party must provide the breaching Party of their intent to terminate said Agreement and provide the breaching Party fourteen (14) days to cure the breach. If the breaching Party fails to correct such breach within fourteen (14) days of written notice, the non-breaching Party may proceed to legal remedies as defined in Section 11 of this Agreement.
c. In the event that the Subcontractor shall correct the situation which has caused the notice of termination to be given by the Contractor as above provided for, within the period of fourteen (14) days from the date of receipt of such notice, the cause of termination shall be deemed waived, and this Agreement shall continue in effect in the same manner as though such cause of termination had not existed, the Contractor, however, reserving its right to damages for breach of any provision of this Agreement.
a. The Subcontractor hereby warrants the Services shall be free from any defects due to faulty materials or workmanship or any violation of this Agreement for _______ year(s) from the date of substantial completion.
b. The Subcontractor shall perform the Services in compliance with the terms and conditions of the Contract.
7. INDEMNITY & INSURANCE
a. The Subcontractor agrees to defend and indemnify the Contractor as well as any of the Contractor’s affiliates, agents, associates, and/or individuals, from all third-party claims that may arise out of, or in relation to the Subcontractor’s work or Services provided.
b. The Subcontractor shall at all times maintain at least the required minimum coverage for insurance for such public liability, property damage, general commercial liability, automotive liability, and workers’ compensation or employer’s liability insurance as will protect the Subcontractor from any and all of the foregoing risks and from any and all claims under such workers’ compensation laws.
c. The Subcontractor shall procure all permits necessary for carrying out the Services and shall comply with all regulations, directives, ordinances, and laws relating to the Services or the conduct thereof.
8. NO EXCLUSIVITY
The Parties subject to this Agreement understand and acknowledge that this Agreement is not exclusive. Each Party respectively agree that they are free to enter into other similar Agreements with other parties.
9. ASSIGNMENT AND SUBCONTRACTS
The Parties to this Agreement shall not assign responsibilities they have agreed to under this Agreement to any other party or individual, except with the written consent and approval of both Parties.
The laws of the State of ___________________ shall govern as to the interpretation, validity, and effect of this Agreement.
11. DISPUTE RESOLUTION
a. Parties to this Agreement shall first attempt to settle any dispute through good-faith negotiation. If the dispute cannot be settled between the parties via negotiation, either party may initiate mediation or binding arbitration in the State of ________________.
b. If the parties do not wish to mediate or arbitrate the dispute and litigation is necessary. The Parties agree that this Agreement will be interpreted based on the laws of the State of _________________, without regard to the conflict of law provisions of such state. The Parties agree the dispute will be resolved in a court of competent jurisdiction in the State of ______________________.
c. The prevailing Party to the dispute will be able to recover its attorney’s fees, court costs, and other reasonable costs for the dispute resolved by litigation or binding arbitration.
All notices or requests required or contemplated by this Agreement must be sent via email with a read receipt, or by U.S. Certified Mail with a return receipt. Notices must be sent to:
Name: _______________________________ Name: _______________________________
Address: _____________________________ Address: _____________________________
Email Address: _________________________ Email Address: _________________________
13. ENTIRE AGREEMENT
This Agreement constitutes the sole and entire agreement of the Parties regarding the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, regarding such subject matter. This Agreement may only be amended, modified, or supplemented by an agreement in writing signed by each Party hereto.
If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile. email, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
16. ELECTRONIC SIGNATURES
This Agreement and related documents entered into in connection with this Agreement are signed when a Party’s signature is delivered electronically, and these signatures must be treated in all respects as having the same force and effect as original signatures.
No waiver by any Party of any of the provisions hereof shall be effective unless explicitly set out in writing and signed by the Party so waiving. No waiver by any Party shall operate or be construed as a waiver in respect of any failure, breach, or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power, or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.
This Agreement cannot be changed, modified, terminated, canceled, rescinded, or in any other way altered or negated unless the same is in writing and signed by the Party against whom enforcement of the change, modification, discharge, termination, cancellation, or rescission is sought.
It is agreed that all understandings and agreements heretofore had between the Parties are merged in this Agreement, which alone fully and completely expresses their understanding, and this Agreement has been entered into after full investigation and consideration, neither party relying upon any statement or representation, not embodied in this Agreement, which may be claimed to have been made by any of the parties hereto.
IN WITNESS WHEREOF, the Subcontractor and the Contractor have executed this Agreement the day and year first above written.
Contractor’s Signature Subcontractor’s Signature
Contractor’s Printed Name Subcontractor’s Printed Name
Contractor’s Contact Information: Subcontractor’s Contact Information:
Address: ______________________________ Address: ______________________________
Phone Number: _________________________ Phone Number: _________________________
Email Address: _________________________ Email Address: _________________________
SERVICES SPECIFICATION SHEET
The Subcontractor agrees to provide the following Services:
Contractor’s Initials _________ Subcontractor’s Initials _________
MATERIALS SPECIFICATION SHEET
The Subcontractor agrees to provide the following materials and equipment:
Contractor’s Initials _________ Subcontractor’s Initials _________
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Frequently Asked Questions and Resources
What is a contract?
Contracts are defined as written or spoken agreements which are enforceable by law. They can cover any topic or industry, whether sales, tenancy, employment, or otherwise (source).
What are the different types of contracts?
There are many different types of contracts, as defined by upcounsell, those for fixed prices, employment, lump sums, time and materials, unilateral or bilateral contracts, simple contracts and more. Each has its own specific terms, and can either be oral or written and some are non-negotiable (like adhesion contracts) while others have room to be adjusted or amended.
What makes a contract different from an estimate, quote, bid, or proposal?
Mainly contracts are set and finite and legally binding, whereas estimates, quotes, bids, and proposals are possibilities which can be accepted, rejected, negotiated, or ignored altogether. The key difference is that often a bid or proposal will contain terms and conditions that can be signed by the requestor and turned into a contract (source).
What should I include in my contract?
Every contract is comprised of no less than two core components: clearly outlined terms and signed agreement between two separate parties. For more information, read our 12 clauses you should include in every contract.
How should I write an effective business contract?
Contract creation can be challenging, in most cases getting legal counsel is advised to ensure it will be legally enforceable should you require that. Essentially you need basic terms which should be abided by, and an agreement on what product or service is to be provided, to whom, by whom, and what will be tendered with specific terms (such as deadlines, or how the delivery will be completed). For more tips, read our beginners guide to contract writing.
What is the difference between a contract and an agreement?
An agreement is any understanding or arrangement reached between two or more parties. A contract is a specific type of agreement that, by its terms and elements, is legally binding and enforceable in a court of law, according to Diffen.com.
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