Free Subcontractor Agreement Template (Word & PDF)

What is a subcontractor agreement, and why does it matter?

A subcontractor agreement is the contract under which a general contractor hands part of a project, such as the electrical, plumbing, framing or painting, to a specialist firm. It sits underneath the contractor's own contract with the owner. The owner pays the contractor, the contractor pays the subcontractor, and this agreement decides what happens at each step in between.

It matters because the general contractor answers to the owner for the subcontractor's work, while the subcontractor depends on the contractor for payment and has little recourse against the owner other than a lien. The terms that carry the most weight are the scope (where one trade stops and the next begins), the timing of payment, insurance, and who bears the cost when something goes wrong. Each of those is also an area where state law steps in.

Construction is among the most regulated kinds of contracting. Prompt payment laws set payment deadlines, many states cap retainage, most restrict indemnity clauses, lien law has its own notices and forms, and licensing rules apply to both businesses. This template is written to defer to those rules where they set limits, and it leaves out clauses that many states restrict. It is a general starting point, not a substitute for the terms your state, your insurer or the owner's contract may require.

When to use this template

You are a general contractor or remodeler bringing in a trade for a defined part of one project.
You are a subcontractor whose contractor has no written agreement, and you want the scope, price and payment timing in writing before you mobilize.
The job is residential or light commercial, and both sides want fault-based responsibility and written change orders instead of a long one-sided form.
You want one short agreement per project instead of a master agreement with work orders.

When it is not the right document

Public works and federally funded projects, which carry required clauses on wages, bonds and payment that this template does not have.
Projects where the owner's contract requires specific subcontract terms to be passed down. Use the form that contract calls for.
Hiring individual workers who work under your direction with your tools. They are likely employees, whatever the paperwork says.
Buying materials only. A supplier is normally covered by a purchase order.

The subcontractor agreement template, section by section

The full text is on the left. Beside each section is a plain-language note on what it does and what to decide before you send it. Words in [brackets] are blanks you fill in.

Subcontractor Agreement

This Subcontractor Agreement (the "Agreement") is made on [Date of the agreement] between [Contractor's legal name] (the "Contractor") and [Subcontractor's legal name] (the "Subcontractor").

It is for the project known as [Project] (the "Project"), located at [Job site] (the "Job Site"). The owner of the Project is [Project owner] (the "Owner").

1. The work

The Subcontractor will perform the following work for the Project (the "Work"):

[Description of the work]

The Work includes all labor, materials, equipment and supervision needed to complete it, unless the description above says otherwise.

If the Contractor has given the Subcontractor plans, specifications or parts of the Contractor's contract with the Owner that apply to the Work, the Subcontractor confirms that it has received them and will perform the Work in line with them. Terms of that contract that the Subcontractor has not received do not apply to the Subcontractor.

2. Price

The Contractor will pay the Subcontractor [Price] for the Work (the "Price"). The Price includes the taxes, fees and other costs of performing the Work.

The Price changes only through a change order under the Changes section.

3. Payment

The Subcontractor will send the Contractor a payment application by [Day of the month payment applications are due] of each month for the Work performed through that day, with the supporting documents the Contractor reasonably asks for.

The Contractor will pay the amount properly due on each application within [Days to pay after the owner pays] days after the Contractor receives payment from the Owner for the Work it covers, and in any case within the time the law requires.

The paragraph above sets the timing of payment. It does not make payment by the Owner a condition of the Subcontractor's right to be paid. If the Owner has not paid the Contractor for Work that the Subcontractor performed properly, the Contractor will pay the Subcontractor within a reasonable time.

If the Contractor disputes part of an application, the Contractor will tell the Subcontractor why in writing and pay the rest on time.

The Contractor may hold back [Retainage percent] percent of each payment as retainage, or the lower limit the law sets if there is one. The Contractor will pay the retainage promptly after the Work is complete and the Subcontractor has given its final lien waiver, and in any case within the time the law requires.

4. Schedule and coordination

The Subcontractor will start the Work on or about [Start of the work] and complete it by [Completion of the work], following the Contractor's project schedule as the Contractor reasonably updates it.

The Subcontractor will coordinate the Work with the Contractor and the other trades, and will tell the Contractor promptly about anything that is delaying or may delay the Work.

If the Work is delayed by something the Subcontractor did not cause and could not reasonably avoid, such as weather, late or defective work by others, or a change, the time for the Work is extended by the length of the delay, provided the Subcontractor tells the Contractor in writing promptly after learning of it.

5. Changes

The Contractor may ask for changes to the Work. A change to the Work, the Price or the schedule takes effect only through a written change order that both parties sign before the changed Work starts.

The Subcontractor will not perform, and the Contractor will not require, changed or extra Work without a signed change order. In an emergency that threatens injury or damage to property, the Subcontractor will act to prevent it, and the parties will sign a change order for that work as soon as they reasonably can.

6. The Subcontractor's duties

The Subcontractor will:

(a) hold the licenses and registrations that the law requires for the Work, and keep them current;

(b) perform the Work in a good and workmanlike manner, following the plans and specifications it has been given, the manufacturers' instructions and the building codes that apply;

(c) provide its own crew, supervision, tools and equipment;

(d) follow the safety laws that apply to the Work and the Contractor's reasonable safety rules for the Job Site;

(e) clean up its work area at the end of each day and remove its debris from the Job Site; and

(f) protect the work and property of the Owner, the Contractor and the other trades, and repair any damage that the Subcontractor causes to it.

7. Insurance

Before starting the Work, the Subcontractor will have the following insurance and will keep it in force until the Work is complete:

(a) commercial general liability insurance with limits of at least [General liability insurance limits]; and

(b) workers' compensation insurance as the law requires.

The Subcontractor will give the Contractor a certificate of insurance before starting the Work, and will tell the Contractor promptly if either policy is canceled or not renewed.

8. Independent contractor

The Subcontractor is an independent contractor and is not an employee, partner or agent of the Contractor. The Subcontractor decides the means and methods of the Work, hires, directs and pays its own workers, and is responsible for its own taxes, insurance and benefits.

Neither party may sign contracts or make commitments on behalf of the other.

9. Lien waivers and paying lower tiers

In exchange for each payment, the Subcontractor will give the Contractor a lien waiver and release for the amount of that payment, in the form that the law that applies to the Project allows. A waiver given before the Subcontractor has received the payment will be conditional on the Subcontractor receiving it.

The Subcontractor will pay its workers, suppliers and lower-tier subcontractors for the Work on time and, if the Contractor reasonably asks, will give the Contractor their lien waivers for the amounts paid.

The Contractor will not ask the Subcontractor to waive lien or bond rights for amounts the Subcontractor has not been paid.

10. Correcting the work and warranties

If the Contractor tells the Subcontractor in writing, within [Period for correcting defective work] after the Work is complete, that part of the Work is defective or does not meet this Agreement, the Subcontractor will correct it promptly at its own cost. That cost includes repairing other work that has to be disturbed to make the correction.

The Subcontractor will pass through to the Contractor and the Owner the manufacturers' warranties on the materials and equipment it installs, and will hand over the warranty documents.

11. Responsibility for losses

Each party is responsible for a claim, loss, damage or expense, including injury to a person and damage to property, to the extent it is caused by that party's negligence or breach of this Agreement, or by the negligence or breach of the people and companies working for that party. To that extent, that party will cover the other party's loss from a claim made by someone else, including reasonable legal costs.

Neither party is responsible under this section for the part of a loss that is caused by the other party's negligence or breach.

This section applies only as far as the law that applies to the Project allows.

12. Default

If the Subcontractor does not perform the Work as this Agreement requires, the Contractor may give the Subcontractor written notice describing the problem. If the Subcontractor does not begin to correct the problem within [Days to start curing after written notice] days after receiving the notice, and keep working until it is corrected, the Contractor may complete or correct the Work, itself or through others, and charge the Subcontractor the reasonable cost of doing so.

The Contractor may deduct that cost from amounts it owes the Subcontractor and will give the Subcontractor a written account of it. If the cost is more than those amounts, the Subcontractor will pay the difference.

If the Contractor does not pay an amount that is due and not in dispute within [Days to start curing after written notice] days after the Subcontractor gives written notice that it is overdue, the Subcontractor may stop the Work until it is paid. The schedule is extended by the time the Work was stopped.

13. Disputes

The parties will first try to resolve a dispute about this Agreement or the Work by talking directly, between people who have authority to settle it.

If they have not resolved the dispute within 15 days after one party asks in writing for that discussion, the dispute will be resolved as follows: [How unresolved disputes are decided]. If the law of the state where the Project is located requires disputes about the Project to be resolved in that state, they will be resolved there.

While a dispute is being resolved, the Subcontractor will continue the Work, except where the Default section allows the Work to be stopped, and the Contractor will continue to pay amounts that are not in dispute.

14. General terms

The laws of [Governing law (state)] govern this Agreement, unless the law of the state where the Project is located requires that state's law to apply.

This Agreement is the whole agreement between the parties about the Work and replaces earlier bids, proposals and discussions about it. It can be changed only in writing signed by both parties.

The Subcontractor may not transfer this Agreement, or subcontract all or most of the Work, without the Contractor's written consent.

If a court finds part of this Agreement unenforceable, the rest remains in effect.

Notices under this Agreement must be in writing and may be sent by email to the address each party has given the other for that purpose.

The parties may sign this Agreement electronically and in separate copies, which together form one agreement.

The parties agree to the terms of this Agreement.

Contractor

SignatureDate

Name

Title

Subcontractor

SignatureDate

Name

Title

Check before you send it

A template cannot know your state, your industry or your deal. These are the points most likely to need a change, and the ones to raise with a lawyer.

Payment timing. Most states have prompt payment laws that set deadlines for paying subcontractors, and some do not enforce pay-if-paid clauses. The template uses pay-when-paid wording and defers to the legal deadline; find out what that deadline is for your project.
Retainage. Many states cap the percentage that can be held back and set a deadline for releasing it, often with different rules for public and private work. Fill in a percentage that is lawful for the project.
Indemnity and insurance. Most states limit clauses that make a subcontractor pay for the contractor's own negligence, and some extend that limit to additional insured requirements. The template uses fault-based wording; an insurer or owner may ask for more.
Licensing and registration. Check that the subcontractor holds the license its trade requires in the project's state, and any contractor registration the state or city requires. Using an unlicensed subcontractor can carry penalties for the contractor as well.
Worker classification. Whether the subcontractor is an independent business is decided by the facts and by state tests, some of them specific to construction. In many states a contractor can also be responsible for workers' compensation for the employees of an uninsured subcontractor.
Lien notices and waivers. Many states require a subcontractor to send a preliminary notice early in the job to keep its lien rights, and some require lien waivers in statutory wording. Neither is built into this template.
Forum and governing law. Many states require disputes over a construction project in the state to be decided there, under that state's law. The template yields to such a rule, so do not count on a home-state clause for an out-of-state project.

How to send it with SignThis

Fill in the blanks. Choose "Send this for signature". After a short sign-up you are asked for the details: names, dates, amounts. Anything you skip stays a blank line.
Add who signs. Add the Contractor and Subcontractor, in that order, with their email addresses.
Place the blocks. Detect fields puts signature, date and name blocks on the signing lines. Add a Text block on any blank you want a signer to fill in.
Send. Each person gets a private link and signs in their browser. When the last one signs, everyone receives the sealed PDF and its audit certificate.

To change the wording first, download the Word file, edit it, save it as a PDF and upload that instead.

Questions about the subcontractor agreement template

What is the difference between pay-when-paid and pay-if-paid?

Pay-when-paid sets timing: the contractor pays the subcontractor a set number of days after the owner pays, and if the owner is late or never pays, the contractor still owes the money within a reasonable time. Pay-if-paid makes the owner's payment a condition, so the subcontractor is not paid unless the contractor is. Some states refuse to enforce pay-if-paid clauses and others require unmistakable wording. This template uses pay-when-paid.

Does a subcontractor need to be licensed and insured?

Licensing depends on the state, the trade and sometimes the size of the job; electrical, plumbing and HVAC work is licensed almost everywhere. Workers' compensation is required for businesses with employees in nearly every state, and general liability insurance, while not always required by law, is asked for by almost every general contractor. The template requires both kinds of insurance and a certificate before work starts.

Can a subcontractor file a lien if the general contractor does not pay?

In most states, yes. A subcontractor who is not paid for work on private property can generally claim a mechanic's lien against it, even though its contract is with the general contractor and not the owner. The right depends on strict steps and deadlines, often starting with a preliminary notice sent near the start of the work. On public projects the claim is usually against a payment bond instead.

What is retainage, and how much can be withheld?

Retainage is a share of each progress payment, often 5 or 10 percent, held back until the work is finished, as an incentive to finish and a fund for corrections. Many states cap the percentage and set a deadline for releasing it, and the rules often differ between public and private projects. The template leaves the percentage blank and defers to any lower legal limit.

Is a subcontractor an employee or an independent contractor?

It depends on how the work is actually done, not on the title of the agreement. A subcontractor that runs its own business, supplies its own crew and tools, controls its methods and works for several contractors looks independent. One person working full time under a contractor's direction usually does not. States apply different tests, and some have rules aimed at construction in particular.