Subcontracting contract in civil construction

In the construction industry, it is common to see a variety of subcontractors working on sites, each responsible for specific tasks that require specialized skills. However, the relationship between the main contractor and subcontractors is governed by detailed agreements known as subcontracting agreements. These agreements are essential to protect both the contractor and subcontractors, ensuring smooth operation and minimizing risks.

Reasons to Use Subcontracting Agreements

While some contractors may be hesitant to formalize subcontracting agreements, especially with subcontractors with whom they have a long-standing relationship, these agreements are critical. They provide a legal framework to clearly define the responsibilities, obligations and expectations of both parties involved.

Protection against Risks and Liabilities

One of the main benefits of subcontracting agreements is the transfer of risks and responsibilities from the contractor to the subcontractor. This means that any problem or issue related to the work performed by the subcontractor becomes the subcontractor's responsibility, relieving the contractor of possible financial or legal burdens.

Cost and Expense Reduction

By transferring certain responsibilities to subcontractors, the contractor can reduce its operating costs and associated expenses. Subcontractors are generally paid based on the completed steps of the work, without the need for deductions for taxes, health insurance, or other benefits, as they are responsible for handling these aspects themselves.

Ensuring Adequate Insurance Coverage

Another advantage of subcontracting agreements is ensuring that the contractor has sufficient coverage through their insurance certificate. By requiring subcontractors to carry their own insurance and liability, the contractor can avoid potential disputes or legal problems in the future.

As a contractor, you can use a generic form for your subcontracting contracts; however, we recommend that you reconsider this option and opt to have your own subcontracting agreement drafted by an attorney. The reason for this is that a generic subcontractor agreement allows for many loopholes and you could pay dearly for them if something happens.

Here are 6 items to carefully note in your subcontracting contracts:

1. Your subcontractor agreement must state that you are the contractor and that the subcontractor is performing specific work for your client. This must be specific and it is best if you clearly state what work the subcontractor will do. You can even be as specific as writing that the subcontractor will hang dry wall in eight different rooms, rather than just stating that the subcontractor will hang dry wall.
2. This document should also indicate how long it will take the subcontractor to perform the specified work and the date it will be completed. It is also necessary to include the exact standards that must be met for work to be accepted and payment to be granted.
3. All subcontractor agreements must also indicate the amount the subcontractor will earn upon completion of the work. It could be an hourly wage, an agreed wage per week, or a fee for all work. It's also a good idea to have a payment protection clause in place.
4. While it would be nice if you could guarantee the conduct of everyone you hire for a project, in today's world you will find that it is necessary to include standards of behavior for your subcontractors in this agreement. This would also include the behavior of any of the employees the subcontractor brings to work with him.
5. Other items that many contractors like you include in their subcontracting contracts are insurance clauses, default clauses, indemnity clauses, and change orders. The way change orders are handled is probably the biggest one, because each subcontractor handles them differently. If you don't want any surprises at the end of your subcontractor's work, we encourage you to indicate which change orders the subcontractor will be compensated for and which they will not.
6. The last items you should include in your subcontracting agreements are those that will protect you as a contractor. This is just a precaution, as we expect your subcontractors to perform their duties properly, but this way, you will be protected if they don't do everything the way they should.

Even if you have subcontracting contracts in place, it's always a good idea to have a separate policy to cover any issues you have with your subcontractors. It's an extra expense you'll need to cover, but the peace of mind it gives you will ensure you don't lose more than you should when a subcontractor doesn't live up to their end of the contract.

It is possible to have a lawyer draw up a basic subcontracting contract for you and then you can make any necessary changes. However, you may want subcontracting contracts drawn up for each of the specific subcontractors you work with. That way, you'll have one for any dry wall subcontractors, one for electricians, one for painters, etc. This will ensure you have the appropriate text for each one and you won't have to worry if you missed something in the process.

Now that you know the importance of these subcontracting agreements, you can make the necessary changes to incorporate them into your construction business and see how your business works better.