Trades Subcontractor Agreement Template: Key Clauses

Yes, if you're sending subcontractors onto a job site, you should have a written trades subcontractor agreement before work starts.

A basic template can help you get moving, but trade work is rarely one-size-fits-all. The real risk is usually in the site details: who fixes defects, who pays for wasted materials, what happens when the builder changes the program, and whether your subcontractor can approach your client directly after the job.

Getting this right doesn't have to be complicated. A good subcontractor contract for trades should give everyone a clear run sheet before tools are on site.

Do You Need A Trades Subcontractor Agreement Template?

Yes, a trades subcontractor agreement template is a useful starting point, but it should be tailored before you use it on a real job.

If you run a trade business, you might use subcontractors for overflow work, specialist tasks or larger construction jobs. For example, an electrical business might bring in a licensed data cabling subcontractor for a commercial fitout, or a plumbing company might use extra labour on a tight deadline.

A handshake might feel easier, especially if you've worked together before. The problem is that site disputes often come down to details no one discussed properly, such as:

• whether the subcontractor had to supply materials or just labour
• what standard of finish was required
• who was responsible for a delay caused by another trade
• whether defects had to be fixed for free
• what happens if the head contractor doesn't pay you on time
• whether the subcontractor can contact your client after the job

Your subcontractor agreement should also fit your role on the job. If you're the head contractor engaging a subbie, your contract needs to protect your client relationship and help you meet the head contract. If you're a subcontractor engaging another subcontractor under you, you'll need to pass through the obligations you're responsible for without creating terms that are unfair or impractical.

Templates often miss these site-specific points. Use the template as a structure, then get the clauses checked against your actual work, state rules, licences, insurance and payment process.

What Should A Construction Subcontractor Agreement Include?

A construction subcontractor agreement should cover the scope, price, timing, site access rules, payment, defects, insurance, termination and client protection in clear, practical terms.

Here's a fill-in outline you can use as a starting point. It's not a finished legal document, and a lawyer should tailor it before you rely on it.

1. Parties: Write the legal names, ABNs or ACNs, trading names and contact details for your business and the subcontractor.
2. Job Details: Identify the project, site address, head contractor or client, purchase order and any plans or specifications.
3. Scope Of Work: Describe exactly what the subcontractor must do, including exclusions and assumptions.
4. Licences And Qualifications: List any required trade licences, registrations, tickets, inductions and safety cards.
5. Price And Payment: Set the rates, milestones, invoicing process, payment timing, set-off rights and supporting documents.
6. Variations: Explain how changes are approved, priced and recorded before extra work is done.
7. Program And Delays: Set start dates, deadlines, delay notice requirements and how extensions of time work.
8. Materials And Equipment: State who supplies materials, who owns them, who bears risk and what standards apply.
9. Defects And Rectification: Set the defect notice process, response times and what happens if defects aren't fixed.
10. WHS And Site Rules: Include site inductions, SWMS, PPE, incident reporting and compliance with lawful directions.
11. Insurance: Require evidence of public liability, workers compensation where relevant, vehicle cover and any project-specific insurance.
12. Confidentiality And Client Protection: Protect your pricing, client details, plans, staff and future work opportunities.
13. Termination: Set when you can suspend or end the agreement, including serious safety breaches or repeated defects.
14. Dispute Process: Create a practical escalation process before positions harden.

If you're using a standard form contract with a small business subcontractor, the unfair contract terms regime under the Australian Consumer Law can matter. From 9 November 2023, unfair terms in standard form small business contracts can attract penalties, so avoid terms that let you change price, scope or payment in a one-sided way without a fair process.

How Should You Deal With Defects And Rework?

You should deal with defects by setting a clear inspection, notice and rectification process in the agreement.

Defects are one of the biggest flashpoints on trade jobs because they affect your reputation with the client. If the subcontractor's work fails an inspection, damages finished surfaces or doesn't meet the plans, you need a process that lets you fix the problem quickly without arguing about every step.

Your defects clause should cover:

• the standard required, such as plans, specifications, Australian Standards, manufacturer instructions and good trade practice
• when you can inspect the work
• how quickly you must notify the subcontractor of a defect after finding it
• how long the subcontractor has to attend site and fix it
• whether you can hold back payment for defective work
• when you can engage someone else to fix the defect and recover the cost
• whether the subcontractor remains responsible during a defects liability period

Worked Example

Mike runs a tiling business in Geelong. He engages a subcontractor to tile two commercial bathrooms for $14,000 plus GST. The agreement says defects must be notified within 5 business days of inspection, and the subcontractor has 10 business days to rectify unless the defect is urgent.

After handover, the builder rejects one bathroom because 12 square metres of tiles are visibly uneven. Mike sends photos, the inspection note and a written defect notice the next day. The subcontractor doesn't return to site within 10 business days.

Mike gets another tiler to rectify the work for $3,500 plus GST. Because the agreement clearly allowed rectification by others after missed notice deadlines, Mike has a much stronger basis to set off that cost against the subcontractor's final invoice.

Without that clause, Mike may still have rights, but the dispute is harder, slower and more expensive to resolve.

Who Is Responsible For Safety On Site?

You can't contract out of work health and safety duties, but your subcontractor agreement should spell out who does what on site.

Under Australian WHS laws, a business or undertaking, often called a PCBU, must manage health and safety risks so far as is reasonably practicable. This can apply to you, your subcontractor, the principal contractor and others working on the site at the same time.

In practical terms, your contract shouldn't say safety is entirely the subcontractor's problem. That won't reflect the law, and it won't help you manage the site. Instead, use the agreement to allocate day-to-day responsibilities.

For trade work, your WHS clause should usually cover:

• site inductions before work starts
• safe work method statements for high-risk construction work
• PPE, tools, plant and equipment requirements
• licences, tickets and competency records
• compliance with site safety plans and lawful directions
• incident and near-miss reporting timeframes
• stop-work rights for unsafe work
• drug and alcohol, fatigue and mobile phone rules where relevant
• cooperation with audits, inspections and incident investigations

For larger construction projects, principal contractor duties may apply. Under the model WHS Regulations, a construction project is generally one where construction work is valued at $250,000 or more, but WHS rules are state and territory based, so you should check the rules for the site location.

Your contract should also require subcontractors to provide current insurance certificates before they start. Public liability insurance is common, and workers compensation may be needed if the subcontractor has employees. If a subcontractor is really working like an employee, the Fair Work Act 2009 sham contracting rules and other employment obligations can also become relevant.

How Should Variations, Delays And Materials Be Handled?

Variations, delays and materials should be handled with written approval steps before anyone changes the work, cost or timing.

This is where many trade disputes begin. Someone on site says, can you just move that wall point, run an extra pipe or come back Saturday? The work gets done, but no one agrees on price, delay or responsibility.

Variations

Your variation clause should say that extra work isn't payable unless it's approved in writing by an authorised person. That writing can be a signed variation, email, purchase order or another method set out in your terms of trade.

A practical variation process might require:

• a description of the changed work
• the reason for the variation
• the price or pricing method
• any extra time needed
• who approved it
• photos or marked-up plans where helpful

Delays

Your delay clause should say what happens if work is held up by weather, other trades, late materials, site access issues or client changes. Require the subcontractor to notify you promptly, with reasons and evidence, rather than raising it at the end of the job.

If your head contract has strict delay notice rules, your subcontractor agreement should support those rules. For example, if you need to notify the builder within 2 business days, don't give your subcontractor a week to tell you.

Materials

Your materials clause should say who supplies what, who checks quantities, who pays for waste, when ownership passes and who bears the risk of theft or damage on site.

Also be clear on substitutions. If the plans specify a particular waterproofing system, cable, fitting or finish, your subcontractor shouldn't swap products without approval. A cheaper product can still cost you more if it leads to failed certification, warranty issues or rework.

Should You Use Back-To-Back Obligations And Non-Solicitation Clauses?

Yes, in many trade jobs you should use back-to-back obligations and non-solicitation clauses, but they need to be fair, clear and workable.

Back-to-back obligations help you pass relevant head contract requirements down to your subcontractor. If the builder requires certain site hours, warranties, insurance, safety documents, site access conditions or defect response times, your subcontractor needs to know those rules before pricing and starting work.

Don't just say the subcontractor must comply with the head contract if they haven't seen it. A better approach is to attach the relevant parts or list the specific obligations that apply.

Be especially careful with payment clauses. Security of payment laws exist in each state and territory to support progress payments in construction work. These laws often make pay when paid clauses void, and the payment claim and payment schedule deadlines differ between jurisdictions. If you receive a payment claim from a subcontractor, get advice quickly so you don't miss a strict deadline.

Back-to-back clauses should also be proportionate. If the head contract has liquidated damages for delay, you might pass through delay liability to the subcontractor only to the extent their breach caused your loss. A blanket clause making the subbie responsible for every project delay can be hard to justify and may cause a fight when something goes wrong.

Non-solicitation clauses protect your client relationships and team. A tradie subcontractor agreement might stop the subcontractor from:

• approaching your client directly for the same project or follow-on work
• using your pricing, plans or client contacts outside the job
• poaching your employees or regular subcontractors
• representing that they work for your business after the contract ends

Restraints need to be reasonable in scope, location and time. A 6 to 12 month non-solicitation period is common in commercial contracts, but what is enforceable depends on the role, client connection, industry and state law. NSW also has specific restraint of trade legislation, so don't assume the same wording works everywhere.

Key Takeaways

• A trades subcontractor agreement template is a good starting point, but it should be tailored to the job, site, licences and head contract.
• Defects clauses should set clear notice, rectification and set-off rights so you can protect your client relationship.
• WHS duties can't simply be pushed onto the subcontractor, but your agreement can allocate site safety responsibilities clearly.
• Variations, delays and materials should be approved in writing before costs or timelines change.
• Back-to-back obligations can help you meet the head contract, but payment terms must respect security of payment laws.
• Non-solicitation and confidentiality clauses help stop subcontractors from using your client relationships against you.

If you'd like help with your trades subcontractor agreements, site-specific clauses, back-to-back obligations or client protection terms, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.