What is a subcontractor agreement?
A subcontractor agreement is a written contract between a general contractor and a subcontractor. The GC has a contract with the owner. The sub agrees to do part of that work, such as the electrical or the drywall, for a set price. The agreement says what the sub does, how and when the sub gets paid, what insurance the sub carries, and what happens if something goes wrong.
Without one, the sub and the GC often find out on the job that they read the scope differently. A written agreement settles that before work starts.
What to include in a subcontractor agreement
- Both businesses. Names, addresses, phone numbers and license numbers.
- The project. Name, address and owner.
- The scope. The sub's work, the plans and specs it follows, and what's excluded. Say whether the sub provides materials or labor only.
- The schedule. Start and finish dates, and a duty to keep pace with the job.
- Price and payment terms. How the sub bills, when the GC pays, and whether payment depends on the owner paying first.
- Retainage. The percentage held back from each payment, and when it's released.
- Lien waivers. A waiver with each payment.
- Insurance. Limits, a certificate of insurance (COI), and additional insured status.
- Change orders, warranty, indemnity, termination and disputes.
Pay-when-paid vs pay-if-paid
These two clauses sound alike but work very differently.
| Clause | What it means | Who takes the risk if the owner doesn't pay |
|---|---|---|
| Pay-when-paid | The GC pays the sub a set number of days after the owner pays the GC. The owner's payment sets the timing. | Usually the GC. The sub still gets paid within a reasonable time. |
| Pay-if-paid | The owner paying the GC is a condition of the sub getting paid at all. | The sub. |
| Fixed days | The GC pays a set number of days after the sub's invoice. | The GC. |
Pay-if-paid clauses aren't enforceable in some states, and courts in other states read them narrowly or treat them as pay-when-paid unless the wording is clear. Many states also have prompt payment laws that set deadlines for paying subs. Check your state's rules before you pick a payment term.
Retainage
Retainage is a part of each payment, often a set percentage, that the GC holds back until the work is finished. It gives the GC money to fix problems or finish the work if the sub walks off. Many states cap retainage or set deadlines for releasing it, especially on public jobs. Check your state before you set the percentage.
Insurance and additional insured status
Ask for the sub's certificate of insurance before they start, and check the dates. A COI shows the sub's policies and limits. Being named as an additional insured on the sub's general liability policy means the GC can claim under that policy for claims caused by the sub's work. The COI alone doesn't make you an additional insured. The sub's insurer has to add you, usually by an endorsement. Ask for a copy.
Indemnity
The indemnity clause in this template has the sub cover claims to the extent they're caused by the sub's own negligence. Many states limit indemnity clauses in construction contracts, especially ones that make a sub cover the GC's own negligence. Keep it fair and check your state.
Subcontractor agreement for construction: other paperwork
Use a change order for any change to the sub's work or price, and collect a lien waiver with each payment. If the sub is a single person rather than a business, an independent contractor agreement may fit better. Your agreement with the owner is a construction contract.
Questions
Is this subcontractor agreement template free?
Yes. Fill it in, then download it as a PDF or Word file. No account needed.
What's the difference between pay-when-paid and pay-if-paid?
Pay-when-paid sets when the sub gets paid, usually a number of days after the owner pays the GC. Pay-if-paid makes the owner's payment a condition of the sub being paid at all. Pay-if-paid clauses aren't enforceable in some states, so check yours.
How much retainage is normal?
It varies by job and contract. Many states cap retainage or set when it has to be released, especially on public projects. Check your state's rules before you set it.
Should I get lien waivers from subcontractors?
Yes. A waiver with each payment shows the sub has been paid for that work, which protects you and the owner from lien claims. Many states set their own waiver forms.
Is this agreement valid in my state?
It's a starting point, not legal advice. States differ on payment terms, retainage, indemnity and lien rules. Have an attorney review it, especially for large jobs.