A Brief Introduction About the Construction Subcontractor Agreement
A construction subcontractor agreement is known to serve as a specialized contract between the subcontractors and the concerned project managers or contractors of the given construction project. The agreement is used for solidifying any contract that exists between the two parties and offers the assurance of guaranteed work to the concerned parties. The experts recommend that before signing the construction subcontractor agreement template, the subcontractors should go through the clause of the specific agreement to assure themselves of the specifics of the contract in order to protect themselves from any sort of unfair risk.
Who Takes the Construction Subcontractor Agreement?
The construction subcontractor agreement is known to be a typical construction contract between a subcontractor and a project manager or a construction contractor. This agreement or contract is usually utilized in construction projects involving a various number of buildings under construction regularly. The subcontractor needs the agreement for providing labor or workforce to some primary or general contractor. In case you are the primary contractor and wish to indulge in the role of a subcontractor for doing a part of the entire construction work, then also you might require this agreement.
Purpose of the Construction Subcontractor Agreement
Undoubtedly, subcontractors are a vital part of most of the business organizations out there –,, especially in the construction industry. In simple terms, a construction subcontractor agreement is a specialized risk control strategy that helps in shifting the risk from one party to another. With the help of this agreement, the contractor can ensure protection from the potential risks derived from the work of the subcontractors.
As the subcontractor agreement has been designed for protecting the contractors from the negligent or intentional acts of the subcontractors, the agreement is expected to have a specific language that entails that subcontractors agree to indemnify or defend the contractor against any lawsuit, claim or damages that arise out of damaging acts of the subs.
Contents of the Construction Subcontractor Agreement
A typical construction subcontractor agreement pdf is known to include the provisions related to the CIS (Construction Industry Scheme). Usually, a construction subcontractor agreement template is written from the perspective of the business as the primary contractor. The contractor is not expected to be a specific company, and particular references to the template can be altered without changing the purpose or meaning of the document. The construction subcontractor agreement is known to contain the clauses as:
- Subcontractor’s engagement.
- Provision of protective clothing and equipment.
- Subcontractor’s status.
- Non-solicitation and non-competition.
- Data protection.
- Jurisdiction and governing laws.
How to Draft the Construction Subcontractor Agreement?
While preparing the construction subcontractor agreement template, most of the contractors would end up getting into long, essay-type contracts without involving any basic reading. When you wish to draft an agreement that specifies the terms & conditions of the contract specifically, here are some important clauses to include in the contract:
- Scope of Work –involving the description of the works by the subcontractor as well as individual responsibilities.
- Duration of Work –Specifying the deadline of the construction work for ensuring the completion of the project on time.
- Payment Details –giving the details of payment of the subcontractor.
- Termination –specifying the clauses for termination of the contract.
While drafting the agreement, it is also important to specify additional details like confidentiality, insurance, indemnification, and warranties.
If you wish to effectively negotiate the contract with the subs to arrange the contract signing, here are some pro tips:
- Establish a separate non-disclosure agreement that helps in protecting confidential or proprietary information during the negotiation of the contract.
- You can advance by reviewing the specific requirements of the contract with the customer. You can then consider negotiation terms & conditions with the subs that flow down the clauses of the contract and remain consistent with internal procedures & policies.
- You can complete the respective agreement negotiation through contract signing when you have time.
Benefits and Drawbacks of the Construction Subcontractor Agreement
While a typical construction subcontractor agreement might seem to benefit the contractor by providing additional protection from the potential risks, it is known to prove beneficial to the subcontractors as well. The agreement serves to be a formal written piece of document that aims at laying out the specific work, time, and other important factors related to construction. By knowing all such factors, the agreement helps in protecting the subcontractors as well as they can prove what the owner or contractor was supposed to know. Moreover, the agreement also serves to be a platform that allows the subcontractors to assert the respective rights and improve the overall business.
Some of the quantitative benefits of subcontracting for any business include the following:
- Reduction of the Costs: Reduction in overall costs turns out to be one of the greatest, as well as the obvious benefits of subcontracting the construction project. When it comes to saving money on a construction project, there are two major avenues:
- Remuneration: Firstly, it becomes vital to highlight that while the hourly wage of the contractual worker might be higher than that of the regular employees or workforce, it can still be possible to achieve savings significantly. Outsourcing turns out to be a cost that is needed only when you require additional help instead of serving as a regular cost. It can help you save significantly from paying a wide range of additional fees like social benefits, union fees, employment insurance, and so much more.
- Performance: When you are hiring experts for the given construction project, you need to ensure that the work done by external sources is of top-notch performance. There should be no worry that you will be required to redo the given task later on. The expertise, as well as qualification of the contractual workers you would be selected for the given project, is known to serve as the key to ultimate success as well as an assurance about the fact that you get the expected results.
- Ensuring Quality of Services: Another major advantage of subcontracting or creating the subcontractor’s agreement is that you can be assured of the overall quality of work or services as long as you are providing the right resources. This is because of the quality of service, or the product is vital to ensuring the overall success of any construction project. In the given arena, the subcontractors tend to be experts in the respective field.
Whether it is a small-scale or a large-scale construction project, the subcontractors are expected to listen to and understand your specific requirements towards delivering a quality result that meets the specific criteria, deadline, and budget at the same time. Hiring experts with the help of the construction subcontractor agreement can also be helpful in achieving a specific task requiring specialized tools, knowledge, or expertise easily.
- Avoiding Problems: When you choose wisely the specific terms & conditions of the given subcontractor agreement, it can help in preventing additional problems or complications in the long run. This might include workplace incidents that might arise out of the presence of incompetent workers or work that is poorly executed. When you prepare the construction subcontractor agreement precisely, it can help in guaranteeing a certain level of quality as you are retaining the professionalism of an experienced workforce.
While there are several benefits of the construction subcontractor agreement, the agreement might turn out expensive on your business than the equivalent rate of employing someone. Moreover, it might also incur some relevant tax implications along with other rights.
What Happens in Case of Violation?
The breach or violation of the construction subcontractor agreement might occur due to several reasons. Some are:
- Owner Delay: This turns out to be a straightforward claim. If the delay of the construction project from the contractor’s end might affect important events like a grand opening or client engagements, there could be the possibility of extended damages that the subcontractor might have to pay.
- Subsequent Purchasers: The subsequent purchaser does not have the same standing as that of the original purchaser for bringing a claim against the general contractor. Such claims against the original contractor or builder are not considered easy to make as a subsequent purchaser.
There is a certain time limitation for bringing forth a case to a court of action. Therefore, it is essential to know about the common grounds of violation(1) and what steps can be taken on account of the same.
Construction subcontractor agreement is no easy walk in the park. Therefore, you need to be cautious while signing the agreement(2). A solid, result-oriented subcontractor agreement can be made as simple as defining the specific responsibilities of each party involved in the given project and the obligations of the contracting parties to each other.