SAMPLE SUBCONTRACTOR AGREEMENT
This Agreement, as negotiated herein, is entered into by and between _________________________, “Subcontractor” and _________________________, “Contractor” on this ____ day of __________________, 20__.
Subcontractor, ________________________________, agrees to provide the following described labor, materials and construction in accordance with plans and specifications as may be referred to herein by reference, upon the following described property:
Contractor agrees to pay to the Subcontractor for the satisfactory performance of the Subcontractor's work the sum of ____________________ ($_______) in accordance with the following terms and conditions:
[Description of Work - describe materials, labor, and equipment to be furnished along with subcontractor’s duties].
The Subcontractor, at its own expense, shall obtain and maintain in full force and effect, without interruption during the term of the Agreement, the following minimum levels of insurance:
A. Workers’ Compensation insurance covering the legal liability of the Contractor and its Subcontractors under the applicable workers’ compensation or occupational disease laws for claims for personal injuries and death resulting there from to the Contractor and its Subcontractor’s employees. The Subcontractor shall also obtain a minimum of $500,000 of Employers’ Liability insurance. Certificates of insurance must include a waiver of subrogation in favor of Contractor.
B. Commercial General Liability insurance covering the legal liability (including liability assumed contractually, whether incidental or not) of the Subcontractor who may be engaged in the services, for claims for personal injuries (including death) and property damage resulting there from arising out of the services to be performed by the Subcontractor, in an amount not less than $500,000 for any one occurrence, $1,000,000 general aggregate (subject to a per project general aggregate provision), $1,000,000 Products/Completed Operations aggregate limit. Commercial General Liability insurance shall be obtained and shall include broad form contractual liability coverage, products/completed operations, cross liability, severability of interest and broad form property damage (if required), and Contractor as well as its directors, officers and employees shall be named as an additional insured on such Commercial General Liability policy regarding liability arising out of operations performed under this Agreement. Form CG 20 10 07 04 and CG 20 37 07 04 must be shown on the certificate of insurance or its equivalent.
C. Automobile Liability insurance covering the legal liability (including liability assumed contractually, whether incidental or not) of the Subcontractor who may be engaged in the services, for claims for personal injuries and death resulting there from and for property belonging to other than the Subcontractor caused by highway licensed vehicles of or used by the Subcontractor in an amount not less than: (i) $500,000 for any one person; (ii) $500,000 for bodily injury for any one occurrence; and (iii) $500,000 for property damage for any one occurrence. Automobile Liability insurance shall provide coverage for owned, hired or non-owned automobile or other automotive equipment and Contractor shall be named as an additional insured on such policy.
The Subcontractor’s insurance coverage shall be primary insurance as respects work on this project for Contractor, its directors, officers, and employees. Any insurance or self-insurance maintained by Contractor shall be excess of the Subcontractor’s insurance. The Subcontractor, in its agreements with subcontractors, shall require subcontractors to obtain insurance meeting the minimum limits and incorporating the contractual requirements that are prescribed by this Section. The Subcontractor hereby waives and relinquishes any right of subrogation against Contractor and its agents, representatives, employees, and affiliates they might possess for any policy of insurance provided under this Section or under any State or Federal Workers’ Compensation or Employer’s Liability Act. Subcontractor shall require its insurer to notify Contractor thirty (30) days prior to the effective date of any cancellation or material change in any of the required policies. To the extent that the Subcontractor utilizes deductibles in conjunction with the insurance required by this Agreement, all deductible expenses will be assumed by the Subcontractor. Insurance shall be placed with insurers with a Best rating of not less than A-.
2. Time and Schedule of Work
Subcontractor shall not deliver any materials to the job site or commence work until notified to do so by Contractor. Subcontractor shall commence work within ___________ days after written notice from Contractor. After Subcontractor commences work, he will then complete the work within ____ working days thereafter subject to excusable delays. Working days are defined as Monday through Friday inclusive, holidays excluded. Scheduling of work, as provided for in this subcontract, is based on acceptable industry standards. The subcontract provision for price and time included herein shall be void at the option of the subcontractor, if subcontractor is not called upon to commence work within six (6) months from the date of the signing of this contract. Should this situation arise, subcontractor is relieved of any responsibility to perform under this subcontract agreement and shall be held harmless by contractor of any liability associated with his refusal to perform. Any amounts that are not paid when due shall bear interest at a rate of _______% per month until paid or the maximum rate permitted by law, whichever is higher. The Contractor's supervisor of this project shall be the designated agent for the Contractor.
Subcontractor warrants its work for a period of _______ year(s) against all defects in materials or workmanship.
The work performed by the Subcontractor shall be at the risk of the Subcontractor exclusively. Subcontractor hereby indemnifies and holds Contractor, its parent and affiliates and their respective officers, directors, employees and agents, harmless from and against any and all claims, actions, losses, judgments, or expenses, including reasonable attorneys fees, arising from or in any way connected with the work performed, materials furnished, or services provided to Contractor during the term of this Agreement.
Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The prevailing party in any arbitration concerning this Agreement shall be entitled to reasonable attorneys' fees.
This Agreement shall be in full force and effect from the date of signing unless canceled in writing by either party with thirty (30) days’ written notice. The cancellation of this Agreement shall not negate any term or condition, such as the indemnity or insurance requirements.
7. Choice of Law
This Agreement is governed by the laws of the State of ____________. Any amendment(s) must be given in writing.
This Agreement, including all terms and conditions hereof, is expressly agreed to and constitutes the entire Agreement as of this date. No other Agreement or understandings, verbal or written, expressed or implied, are a part of this Agreement unless specified herein.
Subcontractor is an independent contractor and not an employee of Contractor.
This form has been prepared for general informational purposes only. It does not constitute legal advice, advertising, a solicitation, or tax advice. Transmission of this form and the information contained herein is not intended to create, and receipt thereof does not constitute formation of, an attorney-client relationship. You should not rely upon this document or information for any purpose without seeking legal advice from an appropriately licensed attorney, including without limitation to review and provide advice on the terms of this form, the appropriate approvals required in connection with the transactions contemplated by this form, and any securities law and other legal issues contemplated by this form or the transactions contemplated by this form.
What is a Subcontractor Agreement?
A subcontractor agreement is a legal document that outlines the responsibilities of someone engaged by a primary contractor to work on a project. When independent contractors work on projects, they sometimes have their own contributors they bring into the job. These are known as subcontractors, and they're subject to similar agreements as the primary contractor. These arrangements are most often seen in the construction industry, where a company contracts for a job and then brings in their own contractors to complete the job. However, it can apply to any job with a similar structure.
For example, many marketing firms bid on jobs for clients and then use freelance designers, writers, and editors to complete the work. The same might happen for a publishing company that signs a license to produce works based on a television series. That company might hire graphic designers and writers as subcontractors to produce the results.
These subcontractors are bound by legal agreements that outline their responsibilities, deadlines, and the rate of pay they receive, as well as any other rules they must follow.
What Is a Subcontractor?
According to IRS definitions, subcontractors are responsible for paying self-employment taxes, keeping their own financial records, and determining how and when work gets done. In short, they are a contractor who works with another contractor.
Why Use a Subcontractor Agreement?
Subcontractor agreements protect all parties in a professional project. They outline the exact expectations of the work, any deadlines, and how compensation is granted. It clarifies responsibilities, from work to insurance coverage, and provides an important legally binding framework for the project.
Subcontractor agreements are an important element of risk management and transfer on a job. Without these agreements, you are taking on liability for anyone you hire to do work. The subcontractor agreement protects you from this liability, lowers overall costs for insurance and employment, and clarifies the specifics of your relationship with your subcontractor.
At the very least, without an agreement, any problems related to your subcontractor could be very costly in terms of liability, court costs, and time. It simply makes good sense to formalize an agreement before you work with another independent contractor.
Are Subcontractors Allowed?
The main agreement between the primary contractor and the client is the Master Agreement. It outlines whether or not subcontractors are allowed, and if they are, what (if any) restrictions are placed on their use. It's essential to make sure that subcontractors are permitted under the Master Agreement.
Check whether you need to tell the client that you're using subcontractors and whether they need to abide by the Master Agreement. Also check to make sure that you, the primary contractor, are not responsible for errors and behavior of your subcontractors. Otherwise, you could be liable for damages if your subcontractor behaves irresponsibly or does harm to the client.
Bids and Payment
If you've taken bids from a number of potential subcontractors, make sure you've tracked the offers on the table and the requirements of each agreement. That way you can be sure that when you draft your subcontractor agreement, you get the facts right. It is helpful to keep a log of all contact with freelancers and to talk with your attorney about terms you might want to include.
Preparing an Agreement
As you prepare your agreement, you want to gather certain facts and information so you know exactly what to outline in the document.
- Know exactly what work needs doing and how it fits into the overall project. Make sure that you and your subcontractor understand your needs and agree that they're capable of delivering.
- Estimate how long the work should take to complete and create a due date with the subcontractor. Try to keep the subcontractor's due date far enough ahead of yours so that any problems can be addressed before you have to turn it over to the client.
- Know if there are any materials or information your subcontractor needs, and work out benchmarks for delivery. If it's a licensed project based on a series of novels, for example, how will you get the novels to the subcontractor? How long will they have to absorb the material? You'll want to build this into your deadlines.
- Agree on the compensation. This can take some back-and-forth negotiations, but know what you want to pay and the maximum you can afford to pay.
- Discuss what should happen in the event either of you breaches the contract. Nobody intends to do this going in, but unfortunate life events occur, and it's better to prepare for problems up front.
When you have this all together, it's time to draft your agreement, making sure you list all the vital information in terms that are clear, easy to understand, and concise.
Structure of a Subcontractor Agreement
There are a number of standard clauses that should be included in any solid subcontractor agreement. While each agreement has its own structure, it should always provide the following factors:
Scope of Work
Duration of Work
Payment and Billing
Prohibition of Assignment
Promises and Warranties
Termination or Modification
Entirety of Agreement
These sections do not have to be entirely separate; some contracts create sub-sections and combine points. Validation and Entirety of Agreement, for example, can be part of the same clause, as can Jurisdiction and Arbitration. What's important is that the information is there in the contract and is very clear and concise.
Finally, the last section in every contract should be the signatures of the contractor and subcontractor, as well as the address, date, company information (if any), and tax information of each party (EIN, SSN, or other tax ID number). Both parties should have a completed copy of the contract, signed by everyone.
Scope of Work
Include a description of the project as well as the details of what duties the subcontractor is responsible for. Be clear and precise. Include the project name, owner, and deliverables. Make sure everyone understands the responsibilities.
Duration of Work
This section outlines any deadlines that are in mind, whether work is as needed, the layout of the project, and the time and date at which the contract will be fulfilled. It's a good idea to set this deadline ahead of your own, so you have time to handle any problems.
Payment and Billing
Outline the means and rate that you'll pay the contractor. Is it an hourly rate? Flat fee? Based on deliverables? Be clear about how and when payment will be issued, important milestones, and exact amounts. Consider a "buyout" clause in case things go badly. Outline if invoices should be submitted, and the format they should take.
Note in the agreement that the worker is an independent contractor responsible for their own taxes, insurance, and the like. This section is important should they decide to challenge their status and want to be treated as an employee.
If your subcontractor is privy to private information, make sure there is a clause forbidding them from disclosing this knowledge outside of the company. Define what makes up "confidential information," and make sure you're in compliance with the Master Agreement.
This stops your freelancer from contacting your client directly and stealing the job out from underneath you, now or in the future. Check local laws or speak with your attorney about whether you can include this and what restrictions your state might have.
This clause clarifies that the work produced by the subcontractor is yours, that they're being hired to develop your intellectual property, and that they waive all rights to it and assign them to you instead.
Make sure the contract clarifies that your subcontractor is responsible for their own insurance coverage, including general liability (commercial and professional), errors and omission, workers compensation, health care, and other types of coverage.
Prohibition of Subcontracting
In general, you want to avoid sub-subcontractors, so include a clause forbidding assignment of work. Otherwise, you could end up with a very muddy picture around the structure of the project. Your Master Agreement may also have prohibitions on the number of levels of contractors allowed.
This ensures that your subcontractor takes responsibility for the quality of the work and removes you from legal problems that might result. It's a vital means of covering yourself.
Promises and Warranties
This covers any promises the subcontractor makes - that they will do professional, high-quality work, their work will be original, they have the skill to complete the job, and they will correct errors they make.
This clause outlines the legal means by which any disagreements will be settled. Usually, it requires arbitration as an alternative or precursor to a court trial, which benefits all parties involved should an issue arise.
Termination or Modification
This section outlines the means by which the contract can be canceled or changed. It can include a "buyout" clause, under which the contractor can pay the subcontractor a smaller fee to take what work they've produced and cancel the rest of the contract. It usually requires written notice of termination to be agreed upon by both parties.
This section identifies the state under whose laws the contract is enforceable. Usually it's the state in which the contracting company is registered. So if your business is in Delaware, the contract is governed by Delaware laws.
This section, though not present on all contracts, specifies that if any part of the contract is unenforceable, the rest of the contract remains in force.
Entirety of Agreement
This section is a sort of catch-all. It clarifies that the written contract makes up the whole agreement between parties and that no other responsibilities on either side are implied or assumed in any way.
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