The Subcontract

Always use a written subcontract — a handshake is how disputes start.

What it should cover

• Scope — exactly what the sub is responsible for (and what they're not).
• Price and payment terms — schedule, retainage, and what triggers payment.
• Schedule — start, duration, and completion.
• Insurance and indemnification requirements.
• Flow-down terms — the relevant terms of your prime contract "flow down" to the sub, so they're bound to the same requirements you are.
• Change orders and dispute resolution.

Have your subcontract reviewed by an attorney.

Going Deeper (Intermediate)

Never put a sub to work on a handshake — use a written subcontract that defines scope, price, schedule, payment terms, insurance, and flow-down of the prime contract's obligations. The subcontract is what protects you when something goes wrong.

Advanced / Pro-Level

Key subcontract clauses to get right:

• Scope — detailed, with exclusions, so gaps don't land on you.
• Payment — pay-when-paid vs. pay-if-paid (big difference), retainage, and lien waivers required with each payment.
• Insurance — required limits, additional-insured and waiver of subrogation endorsements, COI before mobilization.
• Indemnity and flow-down of the prime terms (the sub is bound to what the owner requires of you).
• Change-order process, schedule obligations, and termination/default provisions. Get the COIs and signed subcontract before they set foot on site.

Practice Challenge

A sub damages another trade's finished work and has no signed subcontract. Why are you exposed? (Answer: without a subcontract you've got no agreed indemnity, insurance requirement, or backcharge mechanism — you may eat the repair and remain liable to the owner; the signed sub (with insurance/additional-insured and flow-down) is exactly what would have shifted that risk.)

In Practice

A handshake sub deal turns into a scope dispute mid-job. A written subcontract with clear scope, price, and flow-down terms settles it before it starts.

Common Mistakes to Avoid

• Subbing on a handshake
• Vague scope in the subcontract
• Missing flow-down and insurance terms

Takeaway: Use a written subcontract covering scope, price/payment, schedule, insurance, and flow-down terms — never sub on a handshake.

Educational content — follow tool manufacturer instructions and have subcontracts reviewed by an attorney.