Subcontractors undertake tasks from a contractor, tasks which the contractor cannot perform due to some reasons, but which he is responsible for. The inducement of hiring subcontractors is to reduce costs or dilute the chances of project risks.
The term subcontractor encompasses under its scope and ambit companies or even self-employed professionals running a business or a partnership, man-power providers, labour agencies who get tasks completed using their own people or supply their workers to other contractors. A subcontractor agreement is akin to a contractor agreement, but, with the main or general contractor as the client.
Black’s Law Dictionary defines subcontract as- “where a person has contracted for the performance of certain work and he in turn engages a third party to perform the whole or part of that which is included in original contract, his agreement with such third person is called a subcontract and such person is called a subcontractor.”
What Is A Subcontractor Agreement?
If you are a general contractor with a plethora of businesses, there are high probabilities that you may find it cumbersome and difficult to complete the contract in time or take up everything by yourself. In such cases you can give a sub-contract to another person who can complete your work for you. You can make a Sub-contractor’s agreement that mentions all the details of the work to be done by the subcontractor including optimum time required to accomplish the task, payment of charges to the subcontractor, termination of the agreement, etc.
A sub-contractor agreement is largely used for construction projects where large number of buildings are being constructed regularly. Usually the construction industry involves various works such as construction, electrical work, plumbing work, flooring, painting, carpentry, etc. All these are usually given on sub-contracts to get the work done faster and more efficiently. So numerous sub-contractor agreements are to be made in such areas. Though this agreement is usually used in construction businesses, if you are a web developer or designer wanting to subcontract certain aspects of designing or developing to another person then you too can make it with a subcontractor agreement.
Who Needs A Subcontractor Agreement?
If you happen to be subcontractor and provide work force or labour to a general or prime contractor or
You are a prime contractor and you want to engage a subcontractor to do whole or part of the work.
Difference Between a Contractor and a Sub-Contractor
A contractor or a general contractor has a contract with the owner of the project or the authorised agent of the owner
A subcontractor is engaged by the “general or prime contractor rather than the owner, or his authorised agent.
Contractor has a direct nexus with the owner of the property.
No direct contract is there between the subcontractor and the owner.
They have the responsibility of managing the entire project as well as the work of the subcontractors.
They are assigned specific works and not responsible for the entire project.
What Goes Into A Good Subcontractor Agreement?
Most often, subcontractors get into long, essay like contracts without even giving it a proper reading. In the quest for getting work, these subcontractors don’t go through the terms and conditions stipulated in the agreement fully, which eventually lands them in a tight spot. A subcontractor agreement aims at protecting the interests of both the parties involved be it a subcontractor providing labour to a prime contractor or a person engaging a subcontractor to carry out the work in whole or in part. The important clauses that define a good subcontractor agreement are enumerated herein below:
Scope of Work:This involves the description of the subcontractor’s works and the duties to be performed by him, this gives the subcontractor a clear idea of what the prime contractor expects out of him, it details the time schedule, time constraints that are likely to crop up, duration of work etc. Though, it is practically impossible to lay down all the duties to be performed by a subcontractor but it is imperative to describe the scope as much as possible.
Duration of Work: It is generally advisable to make a deadline for the completion of the project well before the date of completion of the deadline prescribed in the master contract with the owner. This helps in reviewing the work and suggesting possible amends. Both the subcontractor and the general contractor need to arrive at a realistic date for completion of the work. They should set out clear deadlines and while doing so should also take into consideration, possible holidays, strikes, occurrence of natural calamities which might render the work impossible etc.
Payment: This details how much a subcontractor will be paid, when will he be paid, how will it be paid, will the payment be per hour basis and if yes, what is the no. of hours the subcontractor needs to work. Would it be a fixed payment at the completion of each project assigned.
Termination: You need to clearly lay down how things may be ended, you may find it odd to discuss it at the start of the agreement, but failure to discuss might lead you into trouble later. It may be either by way of mutual agreement or at the option of one party on failure of the other party to comply with the terms of the agreement.
Confidentiality: This involves treating information related to business or project as confidential and also ensuring that the subcontractor does not disclose information relating to the project that he is working on to anyone. Also referring to the master document of the owner is important to see if their are set non-disclosure guidelines, certain information that you can/can’t divulge to the subcontractor.
Insurance: This defines whether the subcontractor, shall obtain minimum levels of insurance at his own expense during the time the agreement subsists, whether,the subcontractor will maintain insurance cover in respect of Workmen’s Compensation as prescribed by the laws of the state, whether subcontractor will provide insurance cover with respect to equipments, vehicles etc.
Warranties and Indemnification: The subcontractor promises to provide quality work, work in an effective and timely fashion, be professional throughout and also to comply with the specifications provided to him. The subcontractor should also warrant to provide work that is original and not copied. The subcontractor shall not be held responsible for any mistake on the general contractor’s part. Nevertheless, subcontractor should also indemnify the general contractor against any loss, damage, liability etc which he may incur as a result of any breach of this agreement by the subcontractor or for any act or omission of the subcontractor while performing his Services.
Assignment: This clause describes whether the subcontractor will be able to further assign the work to someone else or not? This is generally avoided because in that case you wouldn’t know who is working on what and the buck would stop nowhere.
Governing Law: This clause specifies the laws that will be invoked in resolving any legal disputes between the two parties, and also covers which courts will have jurisdiction to adjudicate those disputes.
Entire Agreement: It specifies that this agreement covers the entire agreement between both parties.It makes it clear that agreements entered into prior to this agreement are superseded by this agreement.
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