As a general contractor, you may need to enlist the assistance of a professional independent vendor – often known as a subcontractor – to assist you on a particular work. Both parties must sign off on a comprehensive and legally enforceable subcontractor agreement to formalize their collaboration. A free subcontractor agreement template has been created to make things as simple as possible for you (Word).
Unpacking the free subcontractor agreement template word
If you are only interested in the free downloaded template, you can get it right here. Please continue reading if you want a deeper grasp of the agreement and the purpose of each clause.
Please understand that this will take approximately 7 minutes to read and will contain a significant amount of legal material before you proceed. Don’t let that deter you, though; it’s critical that you fully comprehend the terms of any arrangement you’re proposing and signing before proceeding.
Define the specifics of the job
A typical subcontractor agreement must comply with applicable state legislation and be simple to understand. Additionally, it should cover everything from the scope of the task and payment terms to the parties’ respective duties and methods of termination.
But before we get into that, it’s vital to present the various parties involved in the partnership and clarify their respective roles in the partnership. It should also mention the date on which the agreement is to begin.
Elaborate on the compensation
Begin the contract with a description of the type of work that the subcontractor will be expected to do. Also, establish the subcontractor’s expectations for the amount of work that will be allocated to them within the timeframe specified in the agreement with them.
Please keep in mind that from this section onwards, you will find frequent references to ‘Task Orders.’ Specifically, this refers to smaller contracts that contain all of the specifics (such as the scope of the work, the cost, and the timeline) of every single assignment that has been given to the subcontractor. It is typically raised following the signing of the subcontractor agreement.
Along with outlining the important items that must be included in a task order for each work, you will also establish how any revisions to a task order should be addressed. Also included in this part should be a statement about how long the agreement will last (also known as its length).
Set basic limitations for the subcontractor
What kind of goods and/or services are you compensating the subcontractor for, and how much are you paying them? Is it necessary for the contractor to account for overtime hours worked by the employees of the subcontractor? During providing the service, who is responsible for paying for incidental expenses? This portion of the subcontractor agreement is responsible for providing answers to all of the above inquiries.
You may also want to specify who is responsible for paying the GST, HST, or any other transaction taxes that may be imposed on the transaction. This section of the agreement will be properly completed with a clause describing the payment arrangements.
Outline the confidentiality, IP, and non-compete clauses
Is it possible that a subcontractor would learn of new business opportunities while working with your client? You wouldn’t want them to take your client away from you in such a situation. You should specify how much access the subcontractor has to the customer in this area, and you should ban them from pursuing new RFPs with the client during this period.
It would also be prudent to include a provision that prohibits the subcontractor from delegating any of the jobs mentioned in the Task Order to another subcontractor in the future.
Mention clauses that safeguard you from liabilities
It is likely that when you begin working with a subcontractor, you will be exchanging a great deal of private or sensitive data with that individual. In addition, you will be developing one-of-a-kind processes and products/services. Boundaries must be established to specify how the subcontractor is permitted to use or share this information with third parties. Furthermore, you must specify who owns the intellectual property rights to the project knowledge and output (the client, the contractor, or the subcontractor).
A non-compete clause, which forbids the subcontractor from working with your direct competitors for a specified length of time, should also be included in hyper-competitive industries.
Make note of these general, yet essential provisions
If you want to complete the tiling for the new housing project you’re working on time, you can’t just pray that your subcontractor will show up on time and do the job! Even the most dependable subcontractors may fail to fulfill their obligations consistently. Furthermore, there could be breaches of the independent contractor agreement in the form of damages due to negligence or legal fees that must be incurred by the independent contractor.
As a result, you must specify in this section who will be held liable for delays and defaults, as well as the procedures that any party can take to terminate the contract. The majority of contractors also include an insurance provider, which holds subcontractors accountable for having complete liability insurance.
Pro tip: Consider including a licensing clause in the contract that validates that the subcontractor is properly licensed to undertake work in the state where the contract is being executed.
Make your contract legally binding with eSignatures
Here are some legal phrases that are commonly used in a wide range of different types of agreements. Among the questions that must be addressed in this part are the following:
The interpretation and execution of this agreement are governed by the laws of which state?
What are the thresholds beyond which no party is liable for damages in the event of a dispute?
What happens if a couple of the provisions of the agreement are found to be unenforceable?
Do both parties agree that the deal is full and final? Do both parties agree that the contract is final?
What methods will both parties use to communicate with one another about issues related to this agreement?
Tip of the day: If you’re looking for a way to save money, consider donating to a good cause. It is critical to include a typical dispute resolution provision in this contract. To provide a more economical alternative to going to court, the clause must declare that disagreements will be resolved by a neutral and non-binding mediator or arbitrator rather than going to court.
Using eSignatures, you may make your contract legally binding.
This piece of the contract is, without a doubt, the most important component of it. Why? The reason for this is that if neither party signs the document, it will not be recognized by the court.
Why do you need a free subcontractor agreement template?
According to the terms of the original work agreement between you and your client, you are liable to the client. It does not, however, include any protections for the subcontractor that you may want to hire later on. In this situation, the use of a subcontractor agreement becomes necessary. This contract may prevent you from having to assume any obligation relating to the work performed on the project by an independent third party.
Consider the following scenario: you have been given a building construction project with a broad scope of work. Among the duties you’ve been handed is tiling, which is work that is outside the scope of your company’s core skills. As a result, you hire a subcontractor (let’s say, Jack) to assist you with the necessary labor and tools. But what happens if Jack does not provide high-quality services or does not adhere to deadlines? You’ll need legal recourse if you want to hold his company accountable.
When you and Jack enter into a subcontractor agreement, the intricacies of your partnership are clarified, and there is no longer any doubt about what is expected of each party. It is also possible to reduce your insurance premiums by having a well-drafted contract in place. Conversely, it can assist subcontractors in protecting their rights and avoiding potentially contentious arguments over payment failures or the scope of work. –
Pro tip: Before you engage with a subcontractor, double-check that your agreement with the customer permits you to outsource a portion of your contractual obligations to a third party. If you fail to do so, the client may simply file a lawsuit against you for the losses caused by the subcontractor.
That’s all there is to it. You are now fully prepared to use the downloadable and free subcontractor agreement template that you have just downloaded (Word).
If you work with clients in the construction or information technology industries, where each project has a unique set of needs, you will find yourself using this subcontracting template more frequently.
Alternatively, you might store this contract template in your SignEasy account and utilize it anytime you hire a new subcontractor, saving time and money. Consider how much time you’ll save if you don’t have to prepare a new contract every time you need to do business! This useful blueprint may be customized and digitally signed before being shared with the subcontractor, and it can be done at any time and from any location.
Pro Tip: Because each subcontracting agreement is unique, its clauses must be customized to meet the needs of the specific circumstances and laws of the jurisdiction in which it is being used. To avoid legal ramifications, consult an attorney before using this free subcontractor agreement contract template.