Subcontractor Agreements Posted on Jan 30, 2018

In transactions for the installation of renewable energy projects, “subcontracting” refers to a process whereby the contractor selling the project does not perform all of the work it agreed to perform. Rather, once the project starts, the contractor hires another contractor to perform portions of its scope of work and arranges for the subcontractor to install portions of the renewable energy project. In a typical subcontractor arrangement, the purchaser of the renewable energy project never pays for or accepts the work that is performed by and delivered by the subcontractor. The contents of a subcontractor agreement are essential for protecting the contractor who is on the hook for the work with the purchaser. The key issues that a subcontractor agreement should cover, include among other things, the range of risks and liabilities that the subcontractor will agree to accept, the scope of work to be performed by the subcontractor, work specifications that match the contractor’s agreement with the purchaser, how the work will be paid and the right to retain a certain amount until final acceptance, a work schedule that meets the contractor’s deadlines, indemnification of the contractor in the event of a purchaser or other third-party claim, warranty obligations and adequate insurance requirements. If a contractor intends to hire a subcontractor for multiple projects, it is a good idea to use a master subcontractor agreement so that all of the details do not need to be negotiated each time. A master subcontractor agreement provides for short addendums to be executed for each project that the subcontractor will work on.

For other considerations when hiring subcontractors, see our blog post “Are Contractors Required To Make Sure Other Contractors On Their Projects Are Properly Licensed?”