A subcontractor agreement template is an agreement between a contractor and a subcontractor. This agreement defines the business-related agreement. It contains a clear, concise and legally-applicable language to explain specific information relating the terms of the agreement.
Moreover, this document has various sections and contains all the necessary areas you will have to document as you create the contract. You will hire a legal professional to work out all the information of a subcontractor agreement, the already-made subcontractor agreement template is the best thing to use. To make your document legally binding, you should include all the details relating to the contract. By using a template, you can save money in terms of legal fees and document creation. However, the main benefit of this document is that it provides legal protection to the contractor and the subcontractor.
Table of Contents
- 1 Collecting information for the form:
- 2 Who requires a subcontractor agreement form?
- 3 Necessary subcontractor agreement clauses:
- 4 How to hire a subcontractor?
- 5 The benefits of subcontractor agreement:
- 6 Conclusion:
Collecting information for the form:
Before entering into a subcontractor agreement with another, the contractor should consider a few things. At first, the contractor has to identify either a client is willing to allow for subcontracted work or not. When an agreement made between the contractor and the client for completing a project then they enter into a contractual agreement and this agreement is known as a Master Agreement. In this agreement, the client specifies whether he allowed the contractor to subcontract out any part of the project or not. If this information isn’t included in the agreement then you have to assume that the client didn’t want anyone other than the original contractor to complete the project.
Additionally, the master agreement should contain unique language and demonstrates the responsibilities and duties of contractors and subcontractors. The contract party has to pay for damages or mistakes that arise from a subcontractor’s work.
Who requires a subcontractor agreement form?
The contractor should clarify each term in the agreement like who is responsible for what work, and what the scope of the work includes. The document should include clear language in order to keep all parties agreeing to the terms legally protected. Here are the parties that get benefit from using a subcontractor agreement form;
- Commercial Property Owners
- Construction Contractors
- ECommerce Operators
- Entrepreneurs and sole properties
- Home owners
- Independent contractors
- Limited liability corporations
- Small business owners
Necessary subcontractor agreement clauses:
The subcontractor agreement contains several clauses. Each clause is written in precise language. Let us discuss them below;
Scope of the project:
This section explains the scope of the project and the work necessary. The client’s orders are incorporation. In the Scope of Work clause, the subcontractor’s responsibilities are inclusions. During reviewing the section, include information in relation to “what if” scenarios. For example, an e-commerce site operator hires a contractor. The contractor further subcontracts some of the graphic designs. Then, the agreement must contain information in relation to client expectations. It will also contain information regarding subcontractor obligations in case client is not satisfied with the work, requires modification, or wants alterations.
Furthermore, the project may contain a reference or title. This section lists the project owner and the location of the project.
Timing for completion:
This section is known as the duration of the work clause. In the agreement, the contractor should provide additional time for the contractors to complete the work. Without overstepping the boundaries the IRS puts in its definitions between an employer and a contract, the contractor makes clear expectations by defining a loose timeline. In addition, this area includes a fixed time deadline but the minute-by-minute or hour-by-hour write-up is necessary in order to provide the nature of the subcontractor’s and contractor’s role. You should include a deadline that falls well before the contractor’s final deadline. This makes sure that the contractor receives plenty of time to assess the work of the subcontractor performers.
Payment and billing clause:
The payment and billing clause defines the payments the subcontractor will receive. Payments usually depend on the scope of the work. If more time is required to complete the project then the contract will contain information about the additional payment. In this area of the contractual form, include hourly, weekly, biweekly, or monthly payment information. Some of the additional details are maximum work hours, subcontractor payment milestones, etc.
Independent contract notice:
This clause enables you to determine the subcontractor and to make a note of the obligation that the subcontractor must handle tax deductions and payments. The subcontractor’s responsibilities has to handle all the following;
- IRS tax withholdings
- Provision of a W9
- Provision of a 1099 form at year’s end
- Self-employment tax payments
- The absence of any promise
This part states that the information the contractor and/or subcontractor must keep confidential. You should include the project details that cannot be shared or discussed in the subcontractor agreement.
The non-compete clause indicates that in relation to competing with the contractor, the contractor doesn’t violate any local laws.
Work for Hire Inclusion:
This clause defines that all the tasks are related to the hiring contractor or individual. It clearly states that the contractor gets a set pay for the work.
Assignment Restrictions and Permissions:
In relation to hiring others to do work, this clause makes the contractor able to define certain permissions and restrictions the subcontractor has.
It makes sure protection for the contractor. It states that when the project has been completed and if something goes wrong that was the responsibility of a subcontractor.
The promises the contractor makes to the subcontractor are mentioned in this section. Some of the typical inclusions may include a guarantee of work quality, a warranty to meet the specifications of the project, etc.
How to hire a subcontractor?
You have to follow some specific steps to hire subcontractor. In case, you don’t have the skills or manpower to perform specific tasks to complete your project, you should hire a subcontractor. Here are the steps to follow;
- To make the things clear from the starting, you should explain the scope of work that your subcontractor will have within your project.
- Next, reach out to potential candidates for your project. It would be better to send them the details of the project so that they can identify whether they would work with you or not.
- You can have a bidding process if you have various candidates interested. In this process, they will send you proposals so that you can make the best choice.
- Make the subcontractor agreement when you have selected a subcontractor to work with. Then, present the agreement to the subcontractor.
- Sign the agreement to finalize it. Make a payment schedule for the subcontractor so that they can start working.
The benefits of subcontractor agreement:
The main benefits of subcontractor agreement is to protect yourself as the contractor. But, this agreement proves more beneficial for the subcontractor you will hire. It is an official document that states the timeline, work scope, and other related details relevant to your project. The subcontractor use the agreement as protection when they already know all this information. This is because in case anything goes south, they can prove what you had both agreed upon.
In conclusion, a subcontractor agreement template is a legal document that covers the expectations of a hired subcontractor. This agreement also defines the responsibilities a hiring contractor has to meet when entering into an agreement with a subcontractor. The most basic information is the parties and their contact information.