The most important step in the preparation process is having a well-written, comprehensive subcontractor agreement.
Like any construction project, the key to the relationship between the general contractor and its subcontractors lies in the steps taken before the project starts. The most important step in the preparation process is having a well-written, comprehensive subcontractor agreement. The subcontract should be specific enough that it serves as the final word on potential areas of dispute. While there are never guarantees on avoiding disagreements - and each individual agreement must be carefully tailored for the individual project at issue - there are several critical areas that every subcontract must address that can help to avoid litigation.
The subcontract should designate the subcontractor as an independent contractor. The importance of this distinction is seen every day in litigation over workplace accidents, substandard work product and other areas of construction. Last month, this column discussed several steps to ensure that all subcontractors and their employees are deemed independent from the general contractor. If they are determined to be employees (by looking at the control imposed by the general, among other factors), the general may be liable for taxes and payroll, job-related injuries, and potential damages arising from injuries to third parties. While courts make this determination by looking at all of the facts and circumstances of the relationship between the parties, inclusion of this provision within the subcontract is always useful.