FAQ: What Are Master Subcontract Agreements?
Dan Levenson June 30, 2016
When you own a business, there may be times when you must hire subcontractors. Along with going through the contracting process and making sure that the work is done, you also have to protect yourself and your company.
This is where a master subcontract agreement comes in.
If you are wondering about master subcontract agreements, this article should help fill in the blanks and give you more confidence on drawing up your own when the time comes.
When Is A Master Subcontract Agreement Needed?
There are many instances when a business will need a subcontractor. For example, Company A has a small business that fixes computers on-site and in some cases, at the customer’s home. Company A hires a subcontractor to do the work at the customer’s home when that need arises.
Another example is a web designer who hires a subcontractor as the programmer or graphic designer for the design process and then does the programming themselves.
In both cases, there has to be a contract in place to protect Company A, and this is where a master subcontract agreement comes into place.
What To Include In A Master Subcontract Agreement
There are three major components that are included in a master subcontract agreement. However, these are the bare minimum. They include:
- The name of the project
- The owner of the project
- The location of the project
Next, you need to ensure that the entirety of the work is described in detail. This scope of the work should include expectations of the subcontractor—precision here is a key element. For example, if you have promised a specific rate of pay that is hourly, a logged detail of this is integral to your contract promise.
While you cannot always remember every single detail, it’s better to have too many details rather than miss something important. This does not mean you have to weigh down the contract with legalese; it simply means to cover all of your bases, even if it’s in layman’s terms.
Necessities To Include
Here are a few must-have items on your master subcontract agreements:
- Billing And Payment Issues. Make sure you have exact information on how much is being paid, when it is being paid, and all billing and payment issues including any caveats on work not performed.
- Time Of Work. The duration of how long the work will take is also important for both parties. You will need to stress the deadline of the project and your subcontractor will need to know the length of time to expect to be paid for the finished product.
Things To Consider
There are a few things to keep in mind that may not come up but should be addressed if applicable.
Make sure that you have insurance that covers a subcontractor. If not, some subcontractors carry their own in the form of general liability insurance. However, if they notify you that they are adding you as an additional insured, be sure to get proof of the certificate of insurance, not just their word. You want to make sure you are protected—either through your own insurance or theirs—with proof.
Another area to address is the subcontractor further subcontracting work out. If this is something you do not approve of happening, be sure to put that clause into your master subcontract agreement so it doesn’t become an issue in the future.
Master subcontract agreements do not have to be confusing or complicated. If you have questions about them or about making sure you have your own proper insurance coverage, we can help answer your questions. Simply contact us and we’ll be more than happy to help.