You may choose to engage a subcontractor when you don’t have the human resources or skills to complete work that you have been contracted to perform. When doing so, it is crucial to have a written subcontractor agreement in place that mirrors your obligations under the existing agreement with your client. This is because you want to be clear about whose responsibility it is to rectify any issues that may arise from the subcontractor’s work. This article will highlight why it’s essential that you have a subcontractor agreement and common clauses that will help minimise your responsibility for subcontractors’ work.

When to Subcontract

Businesses will engage contractors for a range of specialised services, such as: 

  • building; 
  • catering; 
  • IT maintenance; and 
  • marketing. 

Due to the complexity of this work, some contractors will choose to further contract out work to more specialised providers. This is known as subcontracting. Deciding whether to subcontract work will depend on several factors, prominently whether you have the:

  • human resources to complete the work; and
  • necessary skills required to perform the job.

For example, builders will often subcontract work out to an electrician to perform the necessary wiring and to a plumber to install the required piping.

Your Responsibility

You will first need to ensure that you have the right to subcontract the work. This should be clearly outlined under your existing contractor agreement with the client. If you are allowed to subcontract the job, you will generally be held responsible for any: 

  • defects in the subcontractors’ performance; or 
  • other violations of your contractor agreement. 

You have engaged them to act on your behalf, so you will be held accountable for their actions.

However, you can negotiate with subcontractors to ensure that you are not held accountable for their work. You can achieve this by making the subcontractor responsible to the client for their own functions. Therefore, your contract can make the subcontractor responsible for:

  • maintaining the project design;
  • completing their part of the project by a specified date; and
  • the quality and standard of their work.

You should also pass down certain rights to subcontractors, including:

  • entitlements for extension of time to complete the work; and
  • being bound where some variation of the work is needed.

Other Common Subcontractor Agreement Clauses

A subcontractor agreement will usually include provisions that outline:

  • the scope of the services they will be providing; 
  • their responsibilities to complete the work to a high standard within a set period;
  • restraint or non-compete obligations that prevent them from directly engaging with your clients or competing with your business; 
  • how and when you will pay them; 
  • intellectual property and confidentiality concerns, including the rights over any materials or processes that each party owns;
  • the circumstances in which either party may choose to terminate the contract
  • who will be responsible for providing and maintaining the equipment used by the subcontractor;
  • any insurance obligations; and
  • whether the work can be further subcontracted.


Disputes may arise where: 

  • there is a defect in the work; 
  • there is a delay in performance; or 
  • other issues arise from their work.

dispute resolution clause should clearly outline what happens if there is a dispute, between either: 

  • your subcontractor and your client; or 
  • you and your subcontractor.

This process should be consistent between both your contractor and subcontractor agreements so that the process is the same between all parties. 

You may also consider whether to require your subcontractors to participate in any dispute resolution process between you and the client. Additionally, the clause may include a requirement to participate in arbitration or mediation, where an independent third party will oversee resolution negotiations, before taking the matter further. 

Key Takeaways

A subcontractor agreement can assist in preventing misunderstandings and disputes if an issue arises due to your subcontractor’s work. An agreement with your subcontractors must reflect your existing agreement with the client, so that both parties clearly understand their obligations and the extent of their legal responsibility. You should have it correctly prepared and signed before engaging your subcontractor. If you are looking for assistance preparing a subcontractor agreement, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page. 

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Rowan ONeill
Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at

View Privacy Policy