Subcontractor Agreement: What Should Be Included
A subcontractor agreement is a written contract between a builder and a trade partner that sets the rules for how you work together: scope, price, payment, insurance, warranty, and what happens when something goes wrong. A good one covers about a dozen items, and most of them have nothing to do with the price. The bid tells you what the work costs. The agreement tells you who is responsible for everything else.
Most builders I talk to have a stack of bids and a handful of handshakes. That works fine until the day it doesn’t, and that day is always expensive.
What is a subcontractor agreement?
It’s the contract that governs the relationship between your company and a trade. In residential construction it usually takes one of two forms:
A master subcontractor agreement. Signed once, it covers every job you do together. Each house then gets a short work order or purchase order with the scope and price for that address.
A project-specific agreement. One contract per job, with the terms and the scope in the same document.
For a builder who uses the same trades house after house, the master agreement is the better setup. You negotiate the terms one time, when nobody is in a hurry and nothing is on fire. After that, each new job is a one-page work order.
What should be included in a subcontractor agreement?
Here’s the list I’d want in any subcontractor agreement for construction. Your attorney will have opinions on the wording, and they should.
The parties. Legal entity names, not nicknames. The name on the agreement should match the name on the W-9 and the insurance certificate.
Scope of work. What’s included, what’s excluded, and which plans and specifications the work is built to. In a master agreement, this points to the work order for each job.
Price and payment terms. How the trade invoices, when you pay, what has to be turned in with each invoice, and whether you hold retainage.
Schedule. How much notice you give, how quickly they mobilize, and what happens if they don’t show.
Changes. No extra work without written approval from your office before it’s performed. This one clause saves a lot of arguments about surprise invoices.
Insurance. The coverage the trade has to carry and the proof they have to provide. More on that in subcontractor insurance requirements.
Indemnification. Who covers whom when a claim comes from the trade’s work. This language is heavily regulated in some states, so it’s attorney territory.
Warranty. How long the trade stands behind the work and how fast they respond to a callback. Ideally it lines up with the warranty you give your client.
Lien waivers. A signed waiver with every payment, on the form your state calls for.
Safety, cleanup, and site rules. Who hauls off their trash, who protects finished surfaces, and what conduct you expect on a client’s property.
Independent contractor status and compliance. The trade is responsible for their own employees, taxes, licenses, and permits.
Default, termination, and disputes. What counts as a default, how much time they get to cure it, your right to finish the work with someone else, and how disputes get resolved.
How do you write a subcontractor agreement?
You write it once, carefully, and then you stop rewriting it. The process looks like this:
Start with your own contract. Read the agreement you sign with clients and list every promise you make: warranty terms, insurance, schedule, cleanup, quality standards. Those obligations should flow down to the trades doing the work.
Draft the business terms in plain English. Payment timing, paperwork required, change approval, callback response time. You know how you want your jobs to run. Write that down.
Have a construction attorney in your state turn it into a contract. Indemnity, lien, and payment rules vary a lot by state. Legal fees here are cheap compared to finding out your key clause isn’t enforceable.
Build the work order. A one-page form with the address, scope, price, plan date, and a line saying it’s governed by the master agreement.
Roll it out to every trade. Including the ones you’ve used for years. Especially those.
Is a subcontractor agreement template good enough?
A subcontractor agreement template is a good starting point and a bad finishing point. A template gives you structure and makes sure you don’t forget a section. It can’t know your state’s lien rules, its limits on indemnity clauses, or how your client contract reads.
So use one to get most of the way there, then pay an attorney to review it once. That’s a lot less expensive than having them draft from scratch. If you want a head start, our Subcontractor Paperwork Package is the paperwork system I’d set up with trade partners.
What does the agreement not replace?
The agreement is one document in a set. Before a trade starts, you also want a W-9, a current certificate of insurance, proof of workers’ comp, and a signed scope for the job. I laid out the full list in the subcontractor paperwork checklist.
It also doesn’t replace vetting. A great contract with a bad trade is still a bad trade. You just have better paperwork while you’re miserable. Do the work up front when you hire subcontractors, and the agreement rarely has to come out of the drawer.
How do you get trades to sign it?
Make it a condition of the first check, and keep it reasonable. Trades push back on agreements for two reasons: the document is twenty pages of one-sided legalese, or nobody explained it.
Keep it readable. If you can’t explain a clause, you probably shouldn’t be asking someone to sign it.
Be fair on payment. If you demand a lot, pay on time. Good trades will sign almost anything reasonable for a builder who pays like clockwork.
Send it with the rest of the onboarding package. One email, one deadline, before the first job.
Hold the line. No signed agreement, no work order. The first exception is the one you’ll regret.
Frequently asked questions
What is a subcontractor agreement in construction?
It’s the written contract between a general contractor or builder and a trade that defines scope, payment, insurance, warranty, and responsibility for the trade’s work. It sits underneath your contract with the client and should be consistent with it.
Do I need a subcontractor agreement for small jobs?
Yes. Small jobs still produce injuries, leaks, and unpaid suppliers. With a master agreement already signed, a small job only needs a one-page work order.
Can I write my own subcontractor agreement?
You can draft the business terms yourself, and you should, because you know how you want jobs to run. Have a construction attorney in your state review it before you use it, since indemnity, lien, and payment rules vary by state.
How often should a subcontractor agreement be updated?
Review it whenever your client contract, your insurance program, or your state’s laws change, and at least every couple of years. When you update it, have every active trade sign the new version.
BTW, if you’d rather not build your trade partner paperwork from a blank page, grab our Subcontractor Paperwork Package over at the Building Optimal Shop, where you can check out the rest of our swag to build a better business. Proceeds go to benefit, Exponencialistas, my non-profit investing in entrepreneurs transforming their communities in Latin America.