subcontractor-agreement

# Subcontractor Agreement

Drafts a subcontractor agreement that defines scope, allocates risk, and ensures compliance with applicable construction and contract law.

## Prerequisites

1. **Prime contract** — owner-contractor agreement including flow-down provisions
2. **Scope documents** — plans, specifications, drawings, or SOW for the subcontracted work
3. **Project details** — location (state/county), timeline, milestones, project type
4. **Party information** — legal names, entity types, states of formation, authorized signatories
5. **Insurance requirements** — Contractor's minimum coverage expectations
6. **Payment structure** — lump sum, unit price, T&M, or cost-plus; retainage percentage

## Section Outline

| # | Section | Key Contents |
|---|---------|-------------|
| 1 | Parties | Legal names, entity types, state of formation, DBAs, authorized reps |
| 2 | Recitals | Prime contract reference, project description, subcontract purpose |
| 3 | Scope of Work | Included/excluded work, specs, materials/equipment, permits, change order process |
| 4 | Contract Price & Payment | Price structure, invoicing, payment timing, retainage (5–10%), lien waivers, disputed amounts, late payment interest |
| 5 | Schedule | Start/completion dates, milestones, delay notice, liquidated damages, force majeure |
| 6 | Insurance & Bonding | CGL, workers' comp, auto, professional liability minimums; additional insured; waiver of subrogation; bonds |
| 7 | Indemnification | Defense/indemnity/hold-harmless; state anti-indemnity statute compliance |
| 8 | Confidentiality | Definition, obligations, exceptions, survival (2–5 years) |
| 9 | Termination | For cause (with cure), for convenience (work performed + demobilization), post-termination duties |
| 10 | Dispute Resolution | Governing law, tiered process (negotiation → mediation → arbitration/litigation), fee allocation |
| 11 | General Provisions | Independent contractor status, compliance, assignment restrictions, severability, integration |
| 12 | Execution | Signature blocks, counterparts, e-signature authorization |

## Payment Clause Template

```
Section _: COMPENSATION AND PAYMENT

_.1 Contract Price. Contractor shall pay Subcontractor [LUMP SUM $_____ /
unit prices per Exhibit _ / T&M per rate schedule Exhibit _] for complete
performance of the Work.

_.2 Invoicing. Subcontractor shall submit invoices [monthly by the ___ day /
upon milestone completion] with: (a) itemized work completed; (b) supporting
documentation; (c) conditional lien waivers for current payment;
(d) unconditional lien waivers for prior payment.

_.3 Payment. Contractor shall pay undisputed amounts within [30] days of
receipt of a proper invoice, less retainage of [___]%.

_.4 Retainage Release. Retainage released within [30] days after:
(a) final completion and acceptance; (b) unconditional final lien waiver;
(c) delivery of all close-out documents.

_.5 Disputed Amounts. Contractor may withhold for disputed or defective
work but shall pay undisputed amounts per §_.3.

_.6 Late Payment. Overdue undisputed amounts bear interest at [___]% per
annum [or the maximum rate under [State] law].
```

## Insurance Minimums

| Coverage | Limits | Notes |
|----------|--------|-------|
| Commercial General Liability | $1–2M occurrence / $2–4M aggregate | Contractor + Owner as additional insureds |
| Workers' Compensation | Statutory | Employer's liability $1M |
| Auto Liability | $1M CSL | If vehicles used on project |
| Professional Liability | $1M per claim | If design/professional services involved |
| Builder's Risk | As appropriate | If applicable to work type |

All policies: 30-day cancellation notice; waiver of subrogation; certificates due before work begins.

## Indemnification Checklist

- [ ] Subcontractor indemnifies for claims arising from its work, negligence, or breach
- [ ] State anti-indemnity statute compliance verified:
  - **Type I** (e.g., CA, TX, FL): Void if covers indemnitee's sole negligence [VERIFY]
  - **Type II** (e.g., NY, IL): Void if covers indemnitee's any negligence [VERIFY]
  - **No restriction**: Broad indemnity permitted [VERIFY]
- [ ] Mutual indemnification for respective negligence considered
- [ ] Duty to defend included (not just indemnify)
- [ ] Indemnity survives termination

## Termination Framework

| Type | Notice | Cure Period | Payment Owed |
|------|--------|-------------|-------------|
| For Cause — curable | Written | 5–10 days | Work performed less damages |
| For Cause — incurable/safety | Written | None | Work performed less damages |
| For Cause — insolvency | Written | None | Work performed less damages |
| For Convenience | Written, [__] days | N/A | Work performed + demobilization; no lost profit |

## State-Specific Compliance

Check these for the project state before drafting:

- **Retainage caps** — many states cap at 5% or 10%
- **Prompt payment statutes** — prescribed payment timelines and interest rates
- **Mechanic's lien requirements** — preliminary notice deadlines and waiver forms
- **Anti-indemnity statutes** — see Indemnification Checklist above
- **Prevailing wage** — if public project or Davis-Bacon applies, include certified payroll requirements

## Guidelines

- Flow-down prime contract obligations by reference; ensure no conflicts with prime terms
- Liquidated damages must be a reasonable pre-estimate of harm, not a penalty — document the basis
- Include explicit OSHA safety obligations and right-to-stop-work for violations
- All scope/price/time changes require written change orders — no oral modifications
- Match lien waiver types (conditional/unconditional, progress/final) to state statutory forms
- Explicitly disclaim employment relationship; Subcontractor responsible for its own taxes and workers' comp
- Use initial caps for defined terms consistently; avoid undefined "reasonable" or "promptly"
- **Do not** include arbitration without confirming client preference
- **Do not** draft indemnification broader than state law permits