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What are the key clauses to include in a subcontractor agreement template?

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If you are a general contractor or a construction manager, you know how important it is to have a clear and comprehensive subcontractor agreement template. A subcontractor agreement is a contract between you and the subcontractor who will perform part of the work on your project. It defines the scope, terms, and expectations of the subcontractor's services, as well as your rights and obligations as the contractor.

A well-written subcontractor agreement template can help you avoid disputes, delays, and legal issues with your subcontractors. It can also protect your interests and reputation in case of poor performance, defects, or accidents caused by the subcontractor. However, not all subcontractor agreements are created equal. There are some key clauses that you should include in your subcontractor agreement template to ensure that it covers all the essential aspects of your relationship with the subcontractor. Here are some of them:

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Zalieka Gibbs

Construction Estimator at TDSC
Derek Godfrey

Experienced Construction Professional and Business Mentor
Alessandra Reyna

Contratos | Governan?a | Processos | Voluntariado

1 Scope of work

This clause describes the specific work that the subcontractor will perform on your project, including the materials, equipment, labor, and quality standards required. It should also specify the schedule, milestones, and deliverables of the subcontractor's work, as well as the procedures for change orders, revisions, and approvals. The scope of work clause should be as detailed and accurate as possible, to avoid ambiguity and scope creep.

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Zalieka Gibbs

Construction Estimator at TDSC
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Definitely having a well-defined scope of work and schedule lays out clear expectations with both the hiring contractor and subcontractor.

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2 Payment terms

This clause defines how and when you will pay the subcontractor for their work, including the payment method, frequency, and conditions. It should also state the invoicing and documentation requirements, as well as the penalties for late or non-payment. The payment terms clause should be fair and realistic, to ensure that the subcontractor is motivated and compensated for their work, and that you have enough cash flow and control over your project budget.

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Alessandra Reyna

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I agree and add that it's essential that the contract manager (or person responsible for the contract) communicates to the financial team about the billing flow and the established rules.

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3 Indemnification and insurance

This clause protects you from liability and losses arising from the subcontractor's negligence, errors, or misconduct. It requires the subcontractor to indemnify and hold you harmless from any claims, damages, or lawsuits resulting from their work. It also requires the subcontractor to carry adequate insurance coverage for their work, such as general liability, workers' compensation, and professional liability. The indemnification and insurance clause should specify the types, limits, and duration of the insurance policies, as well as the proof and notice requirements.

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4 Warranty and defect correction

This clause guarantees that the subcontractor's work will conform to the specifications, codes, and standards of the project, and that it will be free from defects or deficiencies. It also outlines the responsibilities and remedies of both parties in case of any defects or non-conformities in the subcontractor's work. The warranty and defect correction clause should state the warranty period, the inspection and notification process, and the correction and compensation options.

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Alessandra Reyna

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For this clause, the deadline for accepting (or not) the delivery must be explicit. The person responsible must be aware of this.

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5 Termination and dispute resolution

This clause defines the grounds and procedures for terminating the subcontractor agreement, either for convenience or for cause. It also sets forth the rights and obligations of both parties in case of termination, such as payment, performance, and property. Additionally, this clause establishes the methods and rules for resolving any disputes or conflicts that may arise between you and the subcontractor, such as negotiation, mediation, arbitration, or litigation. The termination and dispute resolution clause should be clear and reasonable, to avoid unnecessary costs and delays.

These are some of the key clauses that you should include in your subcontractor agreement template. However, depending on your project and your subcontractor's services, you may need to add or modify other clauses to suit your specific needs and expectations. You should always consult a legal professional before drafting or signing any subcontractor agreement, to ensure that it complies with the applicable laws and regulations, and that it protects your interests and rights.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Derek Godfrey

Experienced Construction Professional and Business Mentor
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Use a standard established form of contract like a JCT. Don’t go for a hybrid that is not proven or tested. Recipe for disaster and a pig to unravel if you do get into a dispute

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Alessandra Reyna

Contratos | Governan?a | Processos | Voluntariado
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In my opinion, the Confidentiality and the General Data Protection Law clauses are very important in this kind of contract, and should be considered.

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What are the key clauses to include in a subcontractor agreement template?

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1 Scope of work

2 Payment terms

3 Indemnification and insurance

4 Warranty and defect correction

5 Termination and dispute resolution

6 Here’s what else to consider

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