In some industries, it is typical for people to hire an independent contractor. In this way, the parties’ agreed terms in the contract dictate the work carried out. However, if you are a contractor, you may need to hire extra skilled professionals to get the job done. This is called subcontracting, where you engage contractors to perform some of the services you agreed to provide for your client. Once a subcontract is created, the contract between the initial contractor and the client becomes the head contract. The relationship between the subcontract and the head contract is an important one. It is essential that you understand this before you go ahead. In this article, we will give you a rundown of all you need to know.
Head contractors and subcontractors
A head contractor is a person or business that holds the initial contract with the client. They are the ones responsible for ensuring that work is done according to the agreed terms and agreed standards. These terms are, of course, outlined in the head contract. On the other hand, the head contractor hires the subcontractor to do all or part of the work. For example, in construction, a builder (the head contractor) might hire a plumber (the subcontractor) to perform the tasks specific to plumbing. In this case, a new contract is created which is now between the head contractor and the person they hire. You can read more about the difference between head contractors (or simply contractors) and subcontractors here.
Importance of a head contract
So, why is all this important? Well, if you are a contractor and have been engaged with for your services, the contract you sign is essentially your promise to your client that the agreed tasks will be performed adequately and up-to-scratch. You have the responsibility of ensuring that this is done. So, when you get a subcontractor to perform some of the services, it is essential that their performance is in line with what you have agreed upon with your client. Therefore, you must pay close attention to your head contract so that the tasks you set out for your subcontractor are on par with your client’s contractual expectations. The terms of your subcontract should be set out clearly to ensure there are no misunderstandings of the work required.
A bad scenario would be an unhappy client due to a misinformed subcontractor not delivering adequately. After all, you may be liable for any of the poor work performed by your subcontractor.
Your subcontracting options
There are different types of subcontracts you can create. These vary according to their relationship with the head contract:
- Back-to-back subcontracts: These are basically mirrors of a head contract. This kind of contract would require the subcontractor to adhere to the terms of the original contract. It offers you the most protection against a subcontractor.
- Pass-through subcontracts: These are contracts that essentially pass down the original obligations and risks to the subcontractor. This ensures that you are able to make a claim against your subcontractor, upon their faulting of the job.
- General subcontracts: They have the weakest connection to the head contract. This subcontract includes general terms and attaches the head contract.
All these options have pros and cons. The correct choice varies on a case by case basis, depending on the level of services required by the subcontractor. We recommend you protect yourself from any risks by obtaining advice from a lawyer.
Conclusion
Subcontracting can provide you with the extra help to deliver specialised services to your client. However, it can also expose you to risks. You must ensure that the subcontract does not conflict with your head contract so that these risks can be mitigated. Navigating this area of contract law may be tricky so it is important that you seek legal advice and ask a lawyer to review your head contract and subcontract.
