Construction Subcontractor Agreement Template

One vague line about scope can turn a profitable job into months of unpaid extra work. Before your crew shows up on site, the paperwork between you and the general contractor decides who pays when plans change, delays hit, or something goes wrong.

How a Subcontract Works

A construction subcontractor agreement is a written contract between a general contractor and a specialty trade – such as an electrician, roofer, or concrete crew – that covers one part of a larger project. It spells out the work, the price, the schedule, and who carries which risks.

The general contractor signs the main deal with the property owner, called the prime contract. The subcontract then passes a slice of that work, and often a slice of its obligations, down to the sub. Because of this, the sub may be bound by terms from a document it never saw.

Subcontractors are typically independent businesses, not employees. Still, how the relationship works day to day matters. The IRS explains how it tells an independent contractor from an employee, which affects taxes for both sides.

When You Need a Written Subcontract

It's generally wise to sign an agreement any time one company hires another to handle part of a building, remodeling, or repair job. A written contract matters most when:

• The job involves significant money, materials, or time
• Several trades must coordinate on the same site
• The prime contract has strict deadlines or penalties
• Payment depends on the owner paying the general contractor first

Verbal deals may be binding in some cases, but they leave both sides arguing over memory when something goes wrong.

Key Terms to Include

A strong subcontract answers the questions that usually spark disputes. Most agreements cover these points:

• Scope of work: what's included and excluded, which drawings and specs apply, and where this trade's work ends and another's begins
• Price and payment: fixed price, hourly, or unit rates, billing dates, and retainage
• Schedule: start date, milestones, completion date, and any delay penalties
• Change orders: how changes are requested, priced, and approved in writing
• Insurance and indemnification: required coverage and who pays if someone is hurt or property is damaged
• Safety and compliance: licenses, permits, and site safety rules
• Termination: when either side can end the deal and what the sub gets paid for work already done
• Dispute resolution: the steps for settling disagreements and which state's law applies

ConsumerShield's construction subcontractor agreement template walks you through each of these sections, so nothing important gets skipped.

How Payment Terms Affect Your Risk

Payment clauses decide more than timing. They decide who takes the hit if the money stops flowing.

A pay-when-paid clause usually means the general contractor pays the sub within a set time after the owner pays. A pay-if-paid clause goes further – the sub may get nothing if the owner never pays. Some states limit or refuse to enforce pay-if-paid terms, so the rules vary by state.

Retainage is another common term. The general contractor holds back part of each payment until the work is finished and accepted. The agreement should say how much is held and exactly what triggers its release.

Lien rights matter too. Many states let unpaid contractors and suppliers file a claim against the property, but deadlines and notice steps differ, so it helps to check your state's rules early.

Handling Changes, Delays, and Disputes

Plans change on almost every job. A good agreement requires change orders in writing, with the new price and schedule agreed before extra work starts. Doing work on a verbal "go ahead" is one of the most common ways subcontractors lose money.

Watch for written notice deadlines. Many subcontracts require the sub to report delays, site problems, or claims within a short window. Miss it, and a valid claim may be waived.

Keep records as the job moves: daily logs, photos, delivery receipts, and emails confirming instructions. Good records can turn a disagreement into a quick fix instead of a lawsuit.

For disputes, many agreements set a path – first talks, then mediation, then arbitration or court. It's worth checking where any hearing would take place, since a distant venue can raise costs.

Common Pricing Structures

The pricing model shapes how risk is split between the two sides. Common options include:

• Fixed price: one set price for a clearly defined scope, where the sub absorbs any overruns
• Cost-plus: actual costs plus a fee, useful when the scope is uncertain but requiring detailed records
• Time and materials: agreed hourly rates plus materials, often used for small or unclear jobs
• Unit price: a rate per unit of work, such as per square foot, paid on actual quantities

Some contractors also use a master agreement that sets standard terms for repeat work, with a short work order for each new project.

What to Check Before You Sign

Ask for the parts of the prime contract that apply to your work, and read them yourself rather than relying on a summary. Flow-down clauses can pull in notice rules, warranties, and indemnity terms you never saw.

Look closely at indemnification language. Broad clauses that make the sub cover the general contractor's own mistakes are limited in many states, but not everywhere. It's also smart to confirm that the insurance limits in the agreement match what your policy actually provides.

Safety terms deserve attention as well. Most subcontracts require crews to follow federal OSHA construction safety guidance and the site's own safety plan, and violations can lead to work stoppages or removal from the job.

Finally, make sure both sides sign the same final version with every exhibit attached, and store a copy with your project records. If you also hire help outside of construction or need terms for a different kind of project, find more subcontractor agreement templates on ConsumerShield.