TL;DR
A subcontractor agreement needs nine sections, and three of them carry almost all the risk: the scope of work (specific enough to settle arguments), the payment terms (watch the pay-when-paid clause from both sides), and the insurance and classification block (certificates on file, W-9 collected, and a relationship that actually passes the 1099 test). Free template outline below, plus the clauses that determine whether a bad month for the GC becomes a bad month for you. This is a practical guide from people who work with contractors daily, not legal advice; have a construction attorney adapt it to your state before you rely on it.
Half the people searching this phrase are GCs who need paper before Monday. The other half are subs about to sign something a GC handed them. The template serves the first group; the clause-by-clause warnings serve the second. Both halves are shorter than a single payment dispute.
The nine sections
1. Parties and project
Legal business names as registered (not the truck-door name), license numbers where your state requires them, and the specific project address. One agreement per project beats a master agreement for most residential work; the master-plus-work-orders structure earns its complexity only at steady volume between the same two companies.
2. Scope of work
The section that settles or creates every argument. Reference the plans by sheet and date where they exist, state what's included, and state what's excluded by name: who patches drywall behind the new panel, who hauls debris, who supplies fasteners. In disputes between GCs and subs, vague scope beats slow payment as the root cause, because vague scope becomes unpaid work first and a payment fight second.
3. Price and payment terms
The amount, the schedule (net 15 or 30 from invoice, or tied to milestones), and retainage if any, with its release conditions. Then the clause every sub should hunt for: pay-when-paid or its harsher cousin pay-if-paid, which makes the GC's obligation to you contingent on the owner paying them. Enforcement varies sharply by state, and some states void the harsh version outright. If you're the sub, negotiate it out or cap the delay ("payment no later than 60 days from invoice regardless of owner payment"). If you're the GC, know your state's rule before leaning on it.
4. Insurance and licensing
General liability minimums with the GC named as additional insured, workers' comp per state law, and certificates collected before the first day on site, not after. GCs: your insurer audits this, and an uninsured sub's accident lands on your policy. Subs: a GC who never asks for your certificate is telling you how the rest of their paperwork works.
5. The classification block
W-9 on file, sub controls their own means and methods, sub carries their own tools and insurance, sub is free to work for others. These aren't boilerplate niceties; they're the factors that decide whether your "subcontractor" is legally an employee. Misclassification cases carry back taxes, penalties, interest, and comp premiums retroactively, and enforcement has been tightening in most states. If you set the schedule and supply the tools, and you pay hourly to one person who works only for you, no agreement wording fixes that.
6. Change orders
Changes priced and signed before work proceeds, same discipline as the prime contract. The flow-down reality: when the owner changes the job, the GC's change order to the owner and yours to the sub need to match, or somebody eats the difference. Our change order template covers the mechanics.
7. Lien rights and waivers
Waivers exchanged at payment, and the distinction that matters: conditional waivers (effective when the check clears) protect the sub, unconditional waivers signed before payment protect only the GC. Never trade an unconditional waiver for a promise. Lien deadlines and preliminary notice rules are state-specific and unforgiving, which is a real place to spend an hour with an attorney.
8. Warranty and callbacks
Length of the sub's workmanship warranty (one year is common), response time for warranty calls, and who pays for access work when a covered defect hides behind finished surfaces.
9. Termination and dispute resolution
Termination for cause with a cure period (48 to 72 hours' written notice to fix the problem), payment for work completed to date, and the dispute ladder: direct negotiation, then mediation, then whatever your attorney recommends for your state and job size.
when every certificate, W-9, and signature should be on file. The agreement you chase mid-project is the one signed with your bargaining power already spent.
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Template outline
| Section | Key contents |
|---|---|
| Parties & project | Legal names, licenses, project address |
| Scope | Plans referenced, inclusions, named exclusions |
| Payment | Amount, schedule, retainage, pay-when-paid terms |
| Insurance | GL minimums, additional insured, comp, certificates first |
| Classification | W-9, own tools, own methods, free to work elsewhere |
| Changes | Signed before work, matched to prime contract |
| Liens | Conditional waivers at payment, state deadlines noted |
| Warranty | Term, response time, access costs |
| Termination | Cause + cure period, pay to date, dispute ladder |
The paperwork family continues in our contractor invoice template, roofing contract template, and cleaning contract template. And if you're the GC signing subs because the work outgrew your crew, make sure the lead engine keeps pace: the SEO for contractors guide is the system behind every busy shop we build for.
Frequently asked questions
What should a subcontractor agreement include?
Nine sections: parties and project, a specific scope with named exclusions, payment terms including any retainage, insurance requirements with certificates collected up front, worker-classification factors (W-9, own tools, own methods), change order procedure, lien waiver terms, warranty terms, and termination with a cure period and dispute process.
What is a pay-when-paid clause?
A clause making the GC's payment to the sub contingent on the owner paying the GC. Courts treat it differently by state, and some states refuse to enforce the harsher pay-if-paid version. Subs should negotiate a cap ("no later than 60 days from invoice regardless"), and GCs should verify their state's rule before relying on it.
Do subcontractors need their own insurance?
Yes: general liability at the minimums the agreement states, with the GC as additional insured, plus workers' comp where state law requires it. GCs should collect certificates before the first site day, because an uninsured sub's accident typically lands on the GC's policy and shows up at insurance audit time either way.
What makes a subcontractor legally an employee?
Control, mostly: set hours, supplied tools, hourly pay, work for only one company, and direction over how (not just what) work gets done all push toward employee status regardless of what the contract says. Misclassification brings back taxes, penalties, interest, and retroactive comp premiums, and state enforcement has been tightening. The agreement should document independence that exists in practice.
Is a subcontractor agreement legally binding?
A signed one, yes, like any contract: offer, acceptance, and consideration. What varies by state is the enforceability of specific clauses, especially pay-if-paid, indemnification, and lien waivers. Use a template to get the structure and the conversation right, then pay a construction attorney for one hour to localize it. That hour is the cheapest insurance in this post.
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