What should I check before signing a subcontract?
Check the clauses that decide when you are paid, what can be taken from you and how fast you must act.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Those are the ones that move money and risk onto you. Start with payment: the application, due and final dates, the notices, and anything that ties your payment to your main contractor being paid. Then look at retention and when it comes back, and at delay damages and whether they are capped. Check the rights to deduct or set off, and every notice period, marking the ones that are time bars. Check what the subcontract brings in from the main contract, and whether your quote's exclusions are part of the deal. Then check what can end it: the default and termination clauses and their periods. For each clause, decide whether to ask for a change, price it or accept it knowingly. If what a clause means in law is unclear, ask your solicitor.
Example
Illustrative example. The scenario and figures are invented.
The facts
A joinery subcontractor is offered a £560,000 subcontract and asked to sign it within 2 weeks.
What happens
- The subcontractor works through the clauses in order. It starts with payment, retention, delay damages, deductions and notices. Then come the terms passed down from the main contract, its quote's exclusions, and termination.
- Four matter: payment at 60 days, retention held until the whole project completes, uncapped delay damages, and a 7 day time bar on variations.
- The subcontractor asks for a cap on delay damages and 14 days for variation notices, with proposed wording for each.
- It prices the payment and retention terms as financing costs.
The outcome
The main contractor accepts both changes, and the subcontractor signs knowing what each of the four clauses costs it.
To have the subcontract checked, each clause rated and the amendments written before you sign, see our Pre-Signing Contract Review service.