Every contracting business handles subcontractors differently. Some have subcontractors as part of their regular crew, and others only sub out a job when they have too much on their plate.
No matter how your company works with subcontractors, you need a solid contract in place for when you work together. But what should you include in that subcontractor agreement?
There are subcontractor agreement templates you can use online, or you can use these tips to build a contract of your own. We’ll walk you through the nine most important clauses to have in a subcontractor contract, so let’s get started!
The Top 9 Things to Include in a Subcontractor Agreement
Scope of Work
Keep everyone on the same page by setting a clear scope of work. Your subcontractor contract should include the schedule, project owner, and materials and equipment they’re responsible for.
You’ll have to work out anything that isn’t clearly set out in the contract, so it’s better to be detailed here.
Payment
How will you pay your subcontractors—by the hour, project, or performance? You can choose what works best for your company, but let your subcontractors know what to expect. Outline how much, the payment schedule, and how you’ll pay them for their work.
Insurance
Does your subcontractor need to have insurance to work on your roofing job? If so, add it to your subcontractor agreement. Specify which type(s) of insurance they need, who pays for it, and how worker’s compensation works.
We recommend mentioning general liability insurance and worker’s compensation in your subcontractor contract.
Jurisdiction
Different states follow different laws. The jurisdiction defines which state and local laws the agreement applies to. Specifying the contract’s jurisdiction is especially important if your roofing or siding company takes jobs across multiple state lines.
Typically, companies will put the state of their physical location as the jurisdiction. So if your office is in Colorado, your jurisdiction should also be Colorado.
Flow-Down Provisions
When you sign a contract with a homeowner or business to do their roof, you might want to include some of it in the contract with your subcontractor.
For example, the original contract you sign states that you must clean up after you complete the project. If you also want your subcontractors to follow that, you can add flow-down provisions for them to adhere to that rule.
If your subcontractor agreement has flow-down provisions, give the subcontractor a copy of the original contract.
Change Orders
The one constant in the roofing world is change! Let your subcontractors know how you want to handle changes to the original plan. Think about how you want to keep track of change details like cost, payment, and task schedules.
Prohibition of Assignment
You expect the subcontractor to be the one to take care of the job when you assign it to them. But that doesn’t always happen. Sometimes, a subcontractor will hire out a subcontractor of their own.
If you want to keep that from happening, you should add a prohibition of assignment (or anti-assignment) clause in your subcontractor agreement. This clause ensures that the subcontractor can’t assign the job out to someone else.
An anti-assignment clause isn’t necessary, but it ensures that you control who is involved in the project.
Dispute Resolution
No one wants to deal with work disputes, but they can come up from time to time. In those situations, you’ll want to have a plan for resolving the dispute.
Your subcontractor contract should walk through the resolution process in well-defined steps. The agreement might even discuss arbitration or mediation, should it come to that.
Termination
Things don’t always work with your subcontractors. If they drop the ball or fail to meet your standards, you may no longer want to work with them. That’s where the termination clause comes into play.
There are two main types of termination clauses: termination for cause and termination for convenience.
Termination for Cause
A termination for cause clause can cover poor workmanship, ignoring the schedule, and using inferior materials. Typically, terminating because of cause requires multiple instances and a building problem.
Termination for Convenience
A convenience termination clause simply states that the employment relationship is at will. This type of termination doesn’t necessarily mean that the subcontractor didn’t do their job right—you (and they) can just terminate the contract because you choose to. Be aware, though. You typically have to pay some costs if you choose to terminate the contract.
Improve Your Subcontractor Relationship with a Subcontractor Agreement
A simple subcontractor agreement will help you and your subs see eye to eye on every project.
Cut out the confusion and make your subcontractor experience smooth sailing with a clear scope of work, payment, insurance, and termination processes. You’ll have better interactions with your subs, and your clients will see better results.
What other clauses will you add to your subcontractor contract? Let us know in the comments below.
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