Subcontractor Agreement Template: What to Include | House Escort

A verbal agreement with a subcontractor feels fine until something goes wrong. Then it costs you time, money, and a working relationship. A solid subcontractor agreement defines exactly who does what, when they get paid, what happens if the work is late or substandard, and who’s responsible when someone gets hurt.

This guide covers what every subcontractor agreement should include and how to create one that protects you whether you’re the GC hiring subs or a trade contractor working under a general.

Why Subcontractor Agreements Matter

Subcontractors are independent businesses — not employees. The legal distinction matters for taxes (1099 vs W-2), liability (your insurance vs theirs), and direction (you specify results, not how they work). Without a written agreement, disputes become a “he-said / she-said” situation where the outcome depends on whoever has better documentation.

A subcontractor agreement also:

Sets clear payment triggers tied to completed milestones, not calendar dates
Defines the scope so there’s no ambiguity about who’s responsible for what work
Specifies insurance requirements so you know you’re protected if a sub’s worker gets hurt
Establishes your recourse if the work is deficient or late

Core Components of a Subcontractor Agreement

1. Identification of Parties

Start with full legal names and contact information:

GC company name, address, license number, contact
Sub company name, address, license number, contact

Both parties should sign. If the sub is a sole proprietor, get their legal name, not just a business name.

2. Scope of Work (Most Important Section)

The scope section is where most disputes originate. Be specific:

Good scope language:

“Subcontractor shall furnish all labor, materials, and equipment to complete the rough electrical and trim-out for the addition at [address] per the plans dated [date]. Work includes: 200-amp service panel upgrade, all branch circuits per plan, outlets, switches, fixtures as specified. Does NOT include low-voltage, HVAC rough-in, or exterior lighting beyond the two porch fixtures on plan Sheet E-2.”

Weak scope language:

“Electrical work for the addition.”

The scope should also specify:

What drawings, plans, or specifications govern the work
Any work explicitly excluded from the sub’s scope
Quality standards (must meet current NEC, pass all inspections)

3. Schedule and Completion

Start date and substantial completion date
Key milestone dates if a multi-phase job
What happens if the sub falls behind (notice requirements, cure period)
Substantial completion definition — what counts as done vs. punch-list items

4. Payment Terms

This is where most subcontractor agreements get vague. Be explicit:

Total contract amount — fixed price or time-and-materials with a not-to-exceed cap
Payment schedule — tied to milestones, not calendar dates
- Example: 20% mobilization, 30% at rough-in complete, 30% at trim-out, 20% at final inspection passed
Payment within X days of invoice — typically 14–30 days after milestone completion
Retainage — on larger jobs, GCs often hold 5–10% of each payment until substantial completion
Change order process — all changes must be in writing with agreed pricing before work proceeds

5. Insurance Requirements

This protects you as the GC from liability if a sub’s worker is injured on your job site.

Minimum requirements:

Commercial General Liability insurance — minimum $1,000,000 per occurrence, $2,000,000 aggregate. You should be named as an additional insured.
Workers’ Compensation insurance — required if the sub has employees; some states exempt sole proprietors, but get a WC exemption certificate in writing if the sub claims they’re exempt
Auto liability — if sub uses vehicles on the project

Require certificates of insurance (COIs) before the sub starts work. Collect them annually if you work with the same subs repeatedly.

6. Indemnification

The indemnification clause specifies that the sub holds you harmless for claims arising from their work, negligence, or actions. A basic clause:

“Subcontractor agrees to indemnify, defend, and hold harmless [GC name] from and against any claims, damages, losses, and expenses arising out of or related to Subcontractor’s performance of work under this agreement, to the extent caused by Subcontractor’s acts or omissions.”

Note: Some states limit or restrict indemnification language. In Texas, the Anti-Indemnity Statute (Tex. Ins. Code Chapter 151) limits broad-form indemnification in construction contracts. Consult a Texas construction attorney if the job is large or if you’re unfamiliar with these limits.

7. License and Permits

State that the sub is responsible for maintaining all required licenses and pulling all required permits for their scope of work, unless otherwise specified.

8. Defective Work and Warranty

Sub is responsible for correcting defective work at no additional cost
Define the warranty period: typically 1 year on labor from substantial completion
Sub’s warranty doesn’t limit the GC’s warranty obligations to the homeowner

9. Dispute Resolution

Specify how disputes are handled before litigation:

Mediation first (cost-effective, private)
Binding arbitration as an alternative to litigation (faster, cheaper than court)
If litigation: specify governing law (your state) and jurisdiction (your county)
Attorney’s fees: specify whether prevailing party recovers fees

10. Termination

Define when either party can terminate the agreement:

For cause: Non-performance, abandonment, safety violations — typically with 48-hour written notice and cure opportunity
For convenience: GC’s right to terminate the contract without cause, with payment for work completed to date

Free Template Starting Point

You can find basic subcontractor agreement templates at:

NAHB Builder’s Guide (National Association of Home Builders)
State contractor association websites
LegalZoom or similar services for low-cost customized templates

A template is a starting point. For jobs over $25,000, paying a construction attorney $200–$400 to review or draft your standard subcontractor agreement is worth every dollar.

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Frequently Asked Questions

What should a subcontractor agreement include?

A complete subcontractor agreement should include: parties and contact information, detailed scope of work, schedule, payment terms (tied to milestones), insurance requirements, indemnification clause, license and permit responsibilities, warranty and defective work remedies, dispute resolution process, and termination provisions.

Do I need a subcontractor agreement for small jobs?

Even for smaller jobs, a short written scope and payment schedule prevents the most common disputes. For any job over $2,000, a formal written agreement is worth the 20 minutes it takes to complete. The bigger the job, the more important the detail in the scope and payment terms.

What insurance should I require from subcontractors?

At minimum: commercial general liability ($1M per occurrence, $2M aggregate) with you named as additional insured, workers’ compensation insurance (or a state-approved WC exemption certificate), and commercial auto liability. Collect certificates of insurance before the sub starts work.

Can I write my own subcontractor agreement in Texas?

Yes. Texas doesn’t require a specific format. However, Texas’s Anti-Indemnity Statute (Chapter 151 of the Insurance Code) limits certain broad indemnification language in construction contracts. For larger jobs, have a Texas construction attorney review your standard agreement to confirm it’s enforceable.

What’s the difference between a subcontractor agreement and a service contract?

A service contract is typically used between a contractor and a homeowner (end client). A subcontractor agreement is between the general contractor and a trade contractor performing part of a larger project. The subcontractor agreement references the prime contract (with the homeowner) and flows down relevant obligations to the sub.