A subcontractor agreement may be necessary when a client contracts one party to carry out a job, but that party requires the services of additional parties to, in fact, carry out said job. When this happens, the party enlisted by the client needs to subcontract additional parties and will require a subcontractor agreement to formalize the arrangement. Before we get started with drafting such an agreement, both clients and service providers, such as freelancers or advisers, need to understand the difference between a contractor and a subcontractor.
A contractor, in this case, is someone who is hired by a client for a particular service. A subcontractor, on the other hand, is when the contractor enlists further talent, who, essentially, fulfill a particular subsect of the project or act as general service providers that assist the contractor with the project in a variety of ways. As a result, a subcontractor agreement is quite distinct from a normal contract between a client and a contractor.
Apart from the reasons mentioned above, a subcontractor agreement has a number of clauses that aren’t typically found in an agreement between a client and a contractor. These also include specifics that need to be figured out before drafting a subcontractor agreement, and are as follows;
Breach of Contract(s) clauses
As a contractor, you’ll want to ensure that none of the subcontractors you decide to enlist are bound to another contract. This will mean making sure that they aren’t contractually obligated to another employer, as this will result in a breach of contract when they work for you.
Contingent conditions for the commencement of work
In many cases, clients will provide additional benefits to the contractor through the course of time in which they are contractually bound to each other. This can range from things like insurance and accident coverage to simpler things like covering the amount it costs for the contractor to commute to and from the working site, if applicable, of course. As a contractor, you’ll want to see if this extends to the subcontractors you enlist, which entails a detailed discussion with your client, as well as a number of clauses that may need to be added to the subcontractor agreement.
Payment related specifics
As a contractor, you may have a certain arrangement to receive your payment(s). You will need to come to an agreement with a subcontractor(s) to see if the same arrangement works for them, or if you will require some modifications. Naturally, this may potentially require additional clauses in the subcontractor agreement.
Right to termination clause
Although the contractor enlists the subcontractor, the general convention dictates that a right to termination clause should be added. This allows the client to terminate the original agreement with the contractor, which, by extension, would terminate any existing contracts with the subcontractor(s) involved.
Work for hire clauses
When a client enlists a contractor, a work for hire clause is added, which gives the copyright and legal possession of any creative work to the client. If subcontractors are hired, the same clause is typically added to make sure there are no legal hiccups for the client.
Drafting a Subcontractor Agreement!
An accurate and legally responsible subcontractor agreement should, ideally, try to cover a number of things. In clearly defined terms, the agreement should try and address the aforementioned issues. The following are a list of things that subcontractor agreements should aim to address;
- Scope of Work – The subcontractor agreement should clearly state the reasons, as well as the capacity in which the subcontractor is being enlisted. This is crucial for both parties to avoid further complications down the line.
- Timelines – A subcontractor agreement should clearly establish the timeframe within which the work must be completed. Typically, payment is also contingent on timeframes, making them all the more important.
- Change clauses – In the instance that the client wants something changed, a change clause typically subjects both the contractor, as well as any subcontractor(s), to agree upon the requested change before it becomes legally binding. This is to account for potentially unreasonable requests made on behalf of the client.
- Termination and Dispute resolution – Typically, contractor and subcontractor agreements have clearly defined channels for resolving any disputes that pertain to the quality of work, delay of work, and/or payments that are due. Usually, this will bind subcontractors to some kind of arbitration and will dissuade them from pursuing legal options and is a very common element in subcontractor agreements.
Apart from these aspects, subcontractor agreements can have a number of versatile clauses and specifics that vary from industry to industry and largely depend on the project in question. Construction, for instance, entails completely different subcontractor agreements when compared to things like web development or content creation for businesses. As a result, we strongly recommend enlisting legal counsel when drafting such an agreement.
Frequently Asked Questions
Sometimes, projects that clients contract specialists to do require additional workers and/or expertise. In this case, the contractor has the ability to hire said workers as subcontractors. The original contractor will be in charge of the overall project, with the subcontractors being hired to do smaller, segmented sections of the project.
A master subcontractor agreement is an agreement between a contractor and a subcontractor(s) that lists the overall conditions, terms, and specifics of their agreement. Such a contract contains a clause that makes existing clauses apply to any further subcontracts between the two parties, legally binding them to the same conditions for as long as they work on the same project.