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Subcontractor agreement

Reviewed by Clausery editors · · 3 min read

A contract between a prime contractor and a subcontractor laying out the sub's portion of the work, payment, how IP and confidentiality flow down from the client, and how disputes between prime and sub are handled.

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When you win a contract and bring in another contractor to do part of it, a subcontractor agreement passes the relevant obligations down: scope, deadlines, confidentiality, IP assignment to the end client, insurance and indemnity.

Use it whenever you subcontract a portion of client work — design, development, writing, construction or specialist services. The sub agrees to be bound by the same standards the prime agreed to with the client.

What to include#

  • Parties and prime contract. Prime and subcontractor details, and a reference to the prime contract with the client (flow-down clause).
  • Scope of subcontracted work. Precise description of the sub's deliverables, milestones, deadlines and standards they must meet.
  • Payment terms. How much the sub is paid, when (often tied to prime being paid by the client — "pay-when-paid"), invoicing procedure, and expenses.
  • IP, confidentiality and non-solicit. Sub assigns work product to prime (for the client), keeps client info confidential, and does not poach the client or prime's staff.
  • Insurance, indemnity and termination. Required insurance (general liability, professional indemnity, workers comp), mutual indemnity, termination terms and dispute resolution.

How to fill it in#

  1. Step 1: Reference the prime contract

    Attach or reference the main client contract and state which clauses flow down to the sub.

  2. Step 2: Define the sub's scope

    State exactly what the sub will deliver and when — milestones, deadlines and acceptance criteria.

  3. Step 3: Set payment (and pay-when-paid)

    Specify rate or fixed price, invoicing cadence and whether payment is conditional on the client paying the prime (note: pay-when-paid is restricted in some jurisdictions).

  4. Step 4: Add insurance and indemnity

    Require minimum insurance cover and name the prime as additional insured; specify indemnity for third-party claims arising from the sub's work.

  5. Step 5: Sign and keep records

    Both sides sign; attach scope of work and insurance certificates. Track deliverables and payments against milestones.

Independent contractor agreement

For direct client-contractor relationships.

Freelance contract

For direct freelance work; sub-agreements add flow-down clauses.

Consulting agreement

Master agreement for direct consulting clients.

Non-disclosure agreement

Confidentiality standalone — usually built into the sub-agreement.

How to write a freelance contract

Core clauses still apply; add flow-down for subs.

Questions

Is a subcontractor an employee?

No. Subs run their own business, invoice you, pay their own tax and insurance, and typically set their own hours. Misclassification risk applies here just like with any contractor.

What is a flow-down clause?

A clause that binds the subcontractor to the same obligations the prime has to the end client: confidentiality, IP assignment, quality standards, deadlines and dispute resolution.

Is pay-when-paid legal?

Restricted in some US states and countries; in many places it cannot indefinitely delay payment. Check local rules or use a "pay-when-paid with X-day backstop" clause.

Does the sub need insurance?

For any significant work yes — general liability, professional indemnity (errors), and workers comp if they have employees. Ask for a certificate of insurance.

Can I subcontract to anyone?

Check the prime contract: some client contracts require client consent before subcontracting, or restrict work to named individuals.

Browse all templates →

These are general templates, not legal or tax advice. Have anything unusual reviewed for your jurisdiction.

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