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When you are hiring someone to provide a service, you are likely contracting with them. Contracting is vastly different from employing someone, which comes with its own set of laws and regulations. However, sometimes, your contractor might end up contracting the job he was contracted to do to another party; this is called subcontracting. It is a common practice as it allows a contractor to outsource certain parts of a project that are not in the contractor’s speciality. However, there are certain differences between contractors and a subcontractors. This article will explain what these differences are and why you should be aware of them. 

What Are the Relevant Contracts?

Contractor Agreement

A contractor will contract with their client through a contractor agreement. The contractor agreement should contain all the relevant information relating to the project. For example, it should explain what the project is achieving and how long the project is expected to take. The agreement should also contain how much the project will cost and if there is a specific amount that the cost can go over before it is the contractor’s responsibility to make up the difference. 

It is important that a contractor uses a contract when dealing with clients as it provides protection as to what was agreed if there is a dispute. Even though you should avoid going to court unless you have to, the courts will enforce a legally binding contract.

Back to Back Agreement

A back to back agreement is a contract entered into between a contractor and its subcontractors. It is often the case that a contractor cannot complete all the work that a client has asked them to do without the help of other contractors. Therefore, the contractor outsources specific work to subcontractors. Usually, the client does not deal with the subcontractors, and the contractor will choose who the subcontractors are. However, a contractor needs to protect themselves from any liability stemming from poor workmanship undertaken by subcontractors. A back to back agreement will outline the obligations and rights stemming from the relationship between the contractor and the subcontractor.

Issues With Subcontractors

Liabilities

An issue that can arise when dealing with subcontractors is who is liable if something goes wrong. The back to back agreement should state that all actions stemming from subcontractors are the responsibility of the subcontractors. This means if a subcontractor does a poor job, they can be sued rather than the contractor. However, the agreement may also include a clause stating that the contractor must approve all work completed by subcontractors.

Another liability issue stems from the subcontractors delay in completing the work. If the subcontractor is slow in completing their given task, the contractor should include some sort of penalty in the contract. This could be an increased price that compensates for the delay in work done.

Payment

Another important point to make clear in the back to back agreement is payment. If the client is slow to pay the contractor, then the contractor will be unable to pay the subcontractor. You should include a clause stating that you will only pay the subcontractor once the client pays you (the contractor). This will stop your subcontractor from prematurely suing or terminating the contract. However, this clause will only be effective for a certain amount of time until the contractor has to sue the client for payment under the original contract. 

Key Takeaways

Contractors will enter into contracts with their clients to complete certain projects. However, they are also likely to enter into further contracts with subcontractors. It is vital that you are aware of all possibilities when contracting with others. It does not always go smoothly, so you need to ensure that your contracts can protect you if something goes wrong. You can ensure you are not liable for the actions of subcontractors by using foolproof back to back agreements. For legal assistance with managing your contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Do I have to use a back to back agreement when dealing with subcontractors?

No, you do not need to use a back to back agreement. However, it is the best contract to protect yourself if you are going to be using subcontractors.

Can subcontractors be sued for the actions of contractors?

No, if you have proper contracts between the relevant parties, then each party is only liable for the actions that they have undertaken. 

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