How to Write a Subcontract Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Creating a legally binding agreement between two parties is an important part of any business relationship and a subcontract agreement is no exception. By understanding the purpose, key elements and terms of these agreements, businesses can protect both parties involved in the contractual relationship.

Genie AI provides a comprehensive resource for drafting high-quality legal documents without the expense of hiring an external lawyer. Our open source legal template library offers millions of datapoints which teach our artificial intelligence what a market-standard subcontract agreement looks like. With the help of our dataset and community template library, anyone can draft and customize their own agreements at their convenience.

At its core, a subcontract agreement is a document that allows businesses to outsource certain tasks or services to third-party contractors – such as specialist associates or freelancers – while providing clarity on expectations for both parties involved in the arrangement. As such, it should outline the scope of work to be completed as well as timelines, costs and any rules governing payment terms or termination of service. It also serves as an important protection mechanism in case either party breaches any contractual obligations; by clearly outlining all terms from the start it helps minimize potential damages should disputes arise down the line.

Furthermore, having this framework in place helps ensure that businesses engage with trustworthy contractors who can be held accountable for their actions under agreed upon rules. This reinforces trust between all involved parties which helps keep projects running smoothly and on schedule – something that’s particularly useful for larger teams working on complex jobs over long periods of time.

In conclusion, investing time into setting up accurate contracts is critical when setting up business relationships with third-party contractors; subcontract agreements provide essential protections while safeguarding against costly disputes later on down the line. To get started on creating your own contracts today with assistance from Genie AI’s extensive community template library, read on below for our step-by-step guidance - no account necessary!

Definitions (feel free to skip)

Subcontractor - An individual or organization hired by another individual or organization to provide services or materials.
Scope - A comprehensive description of the services and/or materials to be provided by the subcontractor.
Timeline - A designated period of time in which a task or project is to be completed.
Payment terms - The amount to be paid, the payment schedule, and any late payment penalties of the agreement.
Currency - The type of money (e.g. US Dollars, Euros) used to complete a transaction.
Taxes/Fees - Money collected by the government from businesses or individuals.
Dispute resolution - A process used to settle disagreements between two or more parties.
Penalties/Remedies - Punishment or compensation for a breach of contract.
Non-disclosure agreement - A legal document used to protect confidential information.
Warranties - A promise that certain conditions are met or services will be provided.
Indemnification - A legal agreement in which one party agrees to cover any damages or losses incurred by the other party.
Risk management - The process of identifying, assessing, and controlling risks.
Health and safety regulations - A legal obligation to ensure the safety of employees and other personnel.
Insurance costs - Money paid to an insurance company to cover potential losses.
Subcontractors - An individual or organization hired by another individual or organization to provide services or materials.
Assignment - The act of transferring rights or obligations from one person or entity to another.
Intellectual property - Original creations of the mind, such as inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.
Liabilities - A legal obligation to pay a debt or to perform a particular duty.
Auditing - A systematic review of an organization’s accounting records.
Reporting - The act of providing information on a regular basis.
Unresolved issues - Problems that have not yet been addressed or solved.
Acceptance/Signature page - A page in an agreement that requires both parties to sign in order to signify agreement to the terms of the agreement.

Contents

• Outline the scope of the subcontract agreement, including the services and/or materials to be provided by the subcontractor.
• Establish timelines and deadlines for the completion of subcontractor services.
• Define the payment terms and any potential late payment penalties.
• Describe any additional terms and conditions required by either party.
• Specify which party is responsible for any taxes or fees related to the agreement.
• Create a dispute resolution process in the event of any disagreements.
• Outline the process for terminating the agreement and the consequences for early termination.
• Include a non-disclosure agreement to protect confidential information.
• Explain any additional warranties and indemnification clauses.
• Ensure that the agreement is in compliance with all applicable laws and regulations.
• Identify the party responsible for insurance costs and/or liabilities associated with the subcontractor services.
• List any subcontractors that are prohibited from providing services.
• Specify who has the right to assign the subcontract agreement to a third party.
• Explain the process for making changes to the agreement.
• Set out the process for resolving any disputes regarding intellectual property ownership.
• Clearly indicate which party is liable for any damages arising from the agreement.
• Outline any applicable health and safety requirements.
• Set out any applicable auditing and reporting obligations.
• Describe the process for resolving any unresolved issues or questions.
• Include an acceptance and signature page that both parties must sign.

Get started

Outline the scope of the subcontract agreement, including the services and/or materials to be provided by the subcontractor.

• Identify the scope of the services and/or materials to be provided by the subcontractor.
• Include a detailed description of the services and/or materials to be provided.
• Discuss the extent of the subcontractor’s responsibilities and obligations.
• Specify whether the subcontractor is providing services or materials.
• Outline the process for any changes that need to be made to the scope of services or materials.
• Make sure to be clear, concise and accurate when outlining the scope of the subcontract agreement.

You will know when you can check this off your list and move on to the next step when you have successfully identified and outlined the scope of the services and/or materials to be provided by the subcontractor.

Establish timelines and deadlines for the completion of subcontractor services.

• Determine the start and end dates for the services the subcontractor will provide.
• Outline the timeline for completion of the services and/or materials, including any required milestones.
• Specify any timelines for submitting items for review and approval.
• Establish any penalties for missing deadlines.
• Check that the timelines and deadlines are mutually agreed upon, and include them in the subcontract agreement.

Once the timelines and deadlines have been determined, agreed upon, and included in the subcontract agreement, it can be checked off the list.

Define the payment terms and any potential late payment penalties.

• Determine the payment terms, including when the subcontractor will be paid, the payment method (e.g. check, wire transfer, etc.), and any potential late payment penalties
• List out all of the payment terms, including the total amount to be paid and any applicable taxes, in the subcontract agreement
• Outline the late payment penalties, such as interest fees, or other charges
• Specify the payment schedule, such as when the first payment will be made, the remaining payments, and their due dates
• Agree on the terms and sign the subcontract agreement
• You have now completed the step of defining the payment terms and any potential late payment penalties, and can move on to the next step.

Describe any additional terms and conditions required by either party.

• Make sure to include any terms or conditions that are specific to the subcontract agreement.
• Consider the scope of the work, timeline for completion, and any performance criteria to include in the agreement.
• Ask both parties to sign and date the agreement so that each is legally bound to the terms and conditions.
• Check that all parties are clear on the expectations and commitments in the agreement.
• Once the agreement is signed and dated, you can check this step off your list and move on to the next step.

Specify which party is responsible for any taxes or fees related to the agreement.

• Determine who will be responsible for paying taxes or fees related to the agreement
• Include the details of which party is responsible for taxes or fees in the agreement
• Specify the amount or percentage of taxes or fees the responsible party will have to pay
• State whether the responsible party will have to pay taxes or fees to the government or other entities
• Specify any conditions or contingencies related to taxes or fees
• When you have completed this step, check it off your list and move on to the next step of creating a dispute resolution process.

Create a dispute resolution process in the event of any disagreements.

• Determine a dispute resolution process. This could be negotiation, arbitration or mediation.
• Specify the process in the agreement. This should include details such as the timeline, the costs involved and the parties that will be involved.
• Include a clause that prevents either party from taking legal action until the dispute resolution process has been completed.
• Once the dispute resolution process is specified in the agreement, you can check this off your list and move on to the next step.

Outline the process for terminating the agreement and the consequences for early termination.

• Outline the process for terminating the agreement, including the notice period and any other conditions that must be met.
• Specify the consequences for early termination, such as a penalty or fee.
• Make sure to include any specific language required by law.
• Check that the termination process is compliant with any applicable laws.
• When you are finished, make sure to review the document and ensure that it is accurate and complete.
• Once you are satisfied, you can move on to the next step.

Include a non-disclosure agreement to protect confidential information.

• Draft a non-disclosure agreement that outlines the confidential information that needs to be protected.
• Specify the obligations of each party in regards to the non-disclosure agreement.
• Make sure to include a set period of time for the non-disclosure agreement to remain in effect.
• Have both parties sign the non-disclosure agreement.
• Once the agreement is signed, you can move on to the next step.

Explain any additional warranties and indemnification clauses.

• Review the subcontract agreement to determine whether additional warranties and/or indemnification clauses need to be added.
• Identify any warranties and/or indemnification clauses that should be included in the subcontract agreement, such as a warranty of title and warranties of satisfactory quality or fitness for purpose.
• Draft the additional warranties and indemnification clauses in accordance with applicable laws and regulations.
• Ensure the subcontract agreement is clear and unambiguous when it comes to responsibilities and liabilities of both parties.
• Incorporate the additional warranties and indemnification clauses into the subcontract agreement.
• Have both parties read and sign the subcontract agreement, including the additional warranties and indemnification clauses.

When you have reviewed the subcontract agreement, identified any warranties and/or indemnification clauses that should be included, drafted the clauses in accordance with applicable laws and regulations, and incorporated the clauses into the subcontract agreement, you can check this step off your list and move on to ensuring that the agreement is in compliance with all applicable laws and regulations.

Ensure that the agreement is in compliance with all applicable laws and regulations.

• Analyze the relevant federal, state, and local laws that pertain to the agreement
• Ensure that the agreement complies with these laws and regulations
• Consult a lawyer for assistance in making sure the agreement meets all legal requirements
• When you are confident that the agreement meets all applicable laws and regulations, you can move on to the next step.

Identify the party responsible for insurance costs and/or liabilities associated with the subcontractor services.

• Research the laws and regulations associated with the subcontractor services to determine who is responsible for insurance costs and/or liabilities.
• Consult with a legal professional to ensure that the agreement is compliant with all applicable laws and regulations.
• Define the party responsible for insurance costs and/or liabilities associated with the subcontractor services in the subcontract agreement.
• Clearly state who is responsible for the insurance costs and/or liabilities associated with the subcontractor services in the agreement.
• Have the subcontractor and other relevant parties sign the agreement to make it legally binding.

Once you have identified the party responsible for insurance costs and/or liabilities associated with the subcontractor services, you can check this step off your list and move on to the next step.

List any subcontractors that are prohibited from providing services.

• Identify any subcontractors who are not allowed to provide services under the agreement.
• Specify the reasons why any subcontractors are not allowed to provide services, such as not having the necessary qualifications or experience.
• List any subcontractors who are not eligible for the agreement due to legal or contractual restrictions.
• Make sure to include any prohibitions or restrictions that are legally required.
• Note any subcontractors who are not allowed to provide services due to conflicts of interest.

Once you have identified and listed any subcontractors who are prohibited from providing services, you can be sure that this step is completed and move on to the next step.

Specify who has the right to assign the subcontract agreement to a third party.

• Identify who is responsible for assigning the agreement to a third party.
• Specify if the agreement can be assigned to more than one third party.
• Provide any requirements for assigning the agreement to a third party.
• Describe the process for assigning the agreement to a third party.
• Include any relevant clauses or other language regarding the assignment of the agreement to a third party.
• Once all the information is finalized, sign and date the agreement.
• Check off this step when the agreement is complete and ready to be assigned to a third party.

Explain the process for making changes to the agreement.

• Agree on who is responsible for making changes to the agreement.
• Specify the process for making changes, including who must approve them and how often changes can be made.
• Ensure that all parties are notified and agree to any changes before they are made.
• Include a clause in the agreement that states that any changes must be made in writing.
• Keep a record of all changes made to the agreement.

Once you have completed these steps, you will have set out the process for making changes to the agreement, and you can move on to the next step.

Set out the process for resolving any disputes regarding intellectual property ownership.

• Outline the process for resolving any disputes regarding intellectual property ownership in the subcontract agreement.
• This may include assigning a third-party mediator or arbitrator to make a decision or establish a process for the two parties to resolve the issue amongst themselves.
• Determine whether the subcontractor or the contractor will be responsible for any fees related to the resolution of disputes.
• Make sure to clearly communicate any expectations for resolution process in the agreement.
• Once the process for resolving disputes is outlined in the agreement, you can check this off your list and move on to the next step.

Clearly indicate which party is liable for any damages arising from the agreement.

• Determine which party will be liable for any damages arising from the agreement.
• Draft a clause that clearly outlines the liability of each party.
• Ensure that all parties understand and agree to the clause, and sign the agreement.
• This step is complete when all parties have signed off on the agreement.

Outline any applicable health and safety requirements.

• Ensure that all steps outlined in the agreement are compliant with all applicable health and safety laws and regulations.
• Include any special considerations based on the nature of the work, for example, if the subcontractor will be working with hazardous materials, special protective equipment may be required.
• Include any other requirements that may be necessary for the subcontractor to comply with.
• Make sure to clearly outline the expectations for both parties in order to ensure the safety of all involved.

Once all applicable health and safety requirements have been outlined, you can check this off your list and move on to the next step.

Set out any applicable auditing and reporting obligations.

• Outline the type of reports that need to be submitted and the timeline for each
• Detail who will be responsible for submitting reports
• Specify the required format for any reports
• Describe any consequences that may occur if reports are not submitted on time
• Lay out any applicable auditing requirements
• Clearly indicate who is responsible for auditing and when it should be completed
• Establish who will receive and review the audit results

Once you’ve answered the above questions and written out all the applicable auditing and reporting obligations, you can move on to the next step — describing the process for resolving any unresolved issues or questions.

Describe the process for resolving any unresolved issues or questions.

• Outline the process for resolving any unresolved issues or questions that may arise.
• Establish a timeline for responding to inquiries and address any language barriers if applicable.
• Create a dispute resolution process for major disagreements that arise and how both parties will handle this situation.
• Make sure to include the steps for resolving disputes such as informal discussions, mediation, and arbitration.
• Specify the process for terminating the subcontract agreement if it is not followed by either party.

You can check this step off your list once you have included a detailed process for resolving any issues or questions to the agreement.

Include an acceptance and signature page that both parties must sign.

• Create a signature page that contains a signature line for both the subcontractor and the contractor.
• Include the date of signature, the full names of the parties, and their respective titles or roles.
• State that both parties have read and agree to the subcontract agreement.
• Make sure the signature page is dated the same as the subcontract agreement.
• Once both parties have signed the agreement and signature page, each party should receive a copy of the signed agreement.
• You will know you have completed this step when both parties have signed the subcontract agreement and signature page.

FAQ:

Q: What is the difference between a subcontractor and a contractor?

Asked by Tommy on January 18th, 2022.
A: A subcontractor is a person or business that enters into an agreement to take on specific tasks or provide services to a contractor, who is typically the main provider of goods or services to the customer. The contractor is responsible for the overall project and delegates specific tasks and services to subcontractors as needed. The contractor will generally have an agreement with the end customer, and then enter into an agreement with the subcontractor to perform specific tasks on behalf of the contractor in order to complete the project.

Q: Are there differences between UK, USA and EU subcontract agreements?

Asked by Molly on February 12th, 2022.
A: Yes, there are some differences between subcontract agreements in the UK, USA and EU. Generally speaking, subcontract agreements in the UK are governed by English law and can be enforced in English courts. Subcontract agreements in the USA are typically governed by state law, as each state has its own rules regarding contracts and agreements. In the EU, subcontract agreements may be governed by a combination of local laws as well as European directives, depending on the nature of the agreement.

Q: Do I need a subcontract agreement if I am a freelancer?

Asked by Lily on March 5th, 2022.
A: It depends on your particular situation and the nature of your work. If you are working as an independent contractor for a company, then it is likely that you will need some kind of contract in place between you and your client which outlines how you will be paid, how long you will work for them, what services you are providing etc. On the other hand, if you are working as a freelancer with no direct connection to any particular company (i.e. you find clients yourself) then it may not be necessary to have a written contract in place. However, it is always best practice to have something in writing that clearly outlines your obligations and expectations for each job you undertake so that there is no confusion later down the line.

Q: What should I include in my subcontract agreement?

Asked by Mason on April 20th, 2022.
A: Your subcontract agreement should include details such as the names and addresses of both parties involved; an outline of the services or tasks being undertaken; payment terms; timelines for completion of work; any additional clauses related to intellectual property rights; confidentiality obligations; protection from liability; termination rights; and dispute resolution mechanisms such as arbitration or mediation. Depending on your industry and sector, there may also be additional clauses which should be included in your agreement – it’s important to seek legal advice if you’re unsure about any aspect of your contract.

Q: Are there any special considerations when writing a technology-based subcontract agreement?

Asked by Abigail on May 10th, 2022.
A: Yes – when writing a technology-based subcontract agreement, it’s important to include specific clauses which address topics such as data security and intellectual property rights related to software development projects. Depending on the type of project being undertaken, you may also need to include clauses which outline how ownership rights will be allocated for any new products or code created during the project. Additionally, if software development is being outsourced overseas then there may also be additional considerations related to privacy laws and export/import regulations which must be taken into account when drafting your contract.

Q: Is it necessary to have my subcontract agreement reviewed by a lawyer?

Asked by Ethan on June 1st, 2022.
A: It is always best practice to have any contract reviewed by a lawyer before signing it – this will ensure that all parties understand their rights and obligations under the agreement, as well as ensuring that all relevant legal requirements have been met. A lawyer can also advise you on any potential problem areas within your contract (such as indemnity clauses or termination rights) so that you can make sure that both parties are adequately protected under the terms of your agreement.

Example dispute

Lawsuits Referencing Subcontract Agreements

• Subcontract agreements are legally binding documents between a contractor and a subcontractor.
• A plaintiff may raise a lawsuit if they believe that the contractor has breached the subcontract agreement in any way, such as by failing to pay the subcontractor for services rendered or not providing the supplies or materials required to complete the work.
• The plaintiff can also sue if they believe they have been wrongfully terminated or have experienced other forms of discrimination or harassment in violation of the agreement.
• In order to win the lawsuit, the plaintiff must be able to prove that the subcontractor violated the terms of the agreement and caused the plaintiff damages.
• The plaintiff must also be able to prove that the damages were a direct result of the breach of contract.
• If the plaintiff is successful, they may be able to receive compensation for their losses, such as lost wages, emotional distress, or other costs incurred as a result of the breach.
• The court may also award punitive damages if the subcontractor is found to have acted in bad faith or with malicious intent.

Templates available (free to use)

Jct Sub Subcontract Agreement
Master Subcontract Agreement
Subcontract Agreement Form

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