A subcontractor is an individual or (in many cases) a

business Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit." Having a business name does not separ ...

that signs a

contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tr ...

to perform part or all of the obligations of another's contract. Put simply the role of a subcontractor is to execute the job they are hired by the contractor for. It is oftentimes a specialized job such as electrical or HVAC and it is the subcontractor's responsibility to execute the work as instructed. A subcontractor (or sub-contractor) is a company or person whom a

general contractor A general contractor, main contractor or prime contractor is responsible for the day-to-day oversight of a construction site, management of vendors and trades, and the communication of information to all involved parties throughout the course of ...

, prime contractor or main contractor hires to perform a specific task as part of an overall

project A project is any undertaking, carried out individually or collaboratively and possibly involving research or design, that is carefully planned to achieve a particular goal. An alternative view sees a project managerially as a sequence of even ...

and normally pays for services provided to the project. While subcontracting often occurs in

building A building, or edifice, is an enclosed structure with a roof and walls standing more or less permanently in one place, such as a house or factory (although there's also portable buildings). Buildings come in a variety of sizes, shapes, and func ...

works and in

civil engineer A civil engineer is a person who practices civil engineering – the application of planning, designing, constructing, maintaining, and operating infrastructure while protecting the public and environmental health, as well as improving existing ...

ing, the range of opportunities for subcontractor is much wider and it is possible that the greatest number of subcontractors now operate in the

information technology Information technology (IT) is the use of computers to create, process, store, retrieve, and exchange all kinds of data . and information. IT forms part of information and communications technology (ICT). An information technology syste ...

and information sectors of the economy. One hires subcontractors either to reduce

cost In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in whic ...

s or to mitigate

risks. In employing subcontractors, the general contractor hopes to receive the same or better service than the general contractor could have provided by itself, at lower overall risk. Many subcontractors do work for the same

companies A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared go ...

rather than different ones. This allows subcontractors to further specialize their skills.

Types

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...

building industry contract law, particularly when using JCT standard form contracts, three subcontractor types are identified: ; Domestic subcontractor: A subcontractor who contracts with the main contractor to supply or fix any materials or goods or execute work forming part of the main contract. Essentially this contractor is employed by the main contractor. ; Nominated subcontractor: Certain contracts permit the architect or supervising officer to reserve the right of the final selection and approval of subcontractors. The main contractor is permitted to make a profit from the use of nominated subcontractors on site, but must provide "attendance" (usually the provision of water, power, restrooms, and other services to enable the nominated subcontractor to do his job). In effect the appointment of nominated subcontractors establishes a direct contractual relationship between the client and the subcontractor. ; Named subcontractors: Effectively the same as a domestic subcontractor — a subcontractor who contracts with the main contractor to supply or fix any materials or goods or execute work forming part of the main contract. Essentially this contractor is employed by the main contractor.

Tax law

Under UK tax law, certain activities that might appear to be subcontracting are actually treated differently. This is a subtlety of corporate taxation that may easily be missed or misunderstood, and may be relevant to research and development tax relief. Examples of activities that involve outsourced work that do not count as subcontracting for tax purposes include: * Collaborative research – research carried out across two companies that benefits both companies. * Externally provided workers * Self-employed consultants.

Payment clauses

Some contractors appoint subcontractors to work under a "pay when paid" clause, sometimes called a "pay if paid" clause, where the general contractor will work with subcontractors and the subcontractors are only paid if and when the general contractor is paid for the work. As example clause from a construction context reads: However, in the case of Avon Brothers, Inc. v. Tom Martin Construction Company, Inc., the

New Jersey Superior Court, Appellate Division The New Jersey Superior Court, Appellate Division (in case citation, N.J. Super. Ct. App. Div) is the intermediate appellate court in New Jersey. "The Appellate Division of New Jersey's Superior Court is the first level appellate court, with appe ...

ruled in 2000 that a pay when paid clause represents an unconditional promise to pay, merely permitting payment to be postponed for a

reasonable time Reasonable time is that amount of time which is fairly necessary, conveniently, to do whatever is required to be done, as soon as circumstances permit. This phrase is a U.S. legal term that has been a topic of controversy for many years. It is gene ...

, and not a condition precedent which would completely excuse the contractor's obligation to pay even though not paid themselves.Meisik and Meislik
Avon Brothers, Inc. v. Tom Martin Construction Company, Inc.
Case Law Summaries, opinion dated 30 August 2000, accessed 30 August 2021 Under

Florida Florida is a state located in the Southeastern region of the United States. Florida is bordered to the west by the Gulf of Mexico, to the northwest by Alabama, to the north by Georgia, to the east by the Bahamas and Atlantic Ocean, and ...

construction law, a pay when paid clause is unenforceable unless it unambiguously transfers the risk of non-payment to the subcontractor.

References

External links

American Subcontractors Association
{{Authority control Contract law Construction trades workers

Types

Tax law

Payment clauses

See also

References

External links