Sub-Contractor Agreements are important to make sure both your business and the sub-contractor are aware of the scope of work to be performed and are clear on the roles and responsibilities of both parties.
Let’s imagine you’re a subcontractor, and you’ve been asked to price up a job. The project has already commenced. Another subcontractor had been lined up, but they’ve been delayed on something else, and the builder is desperate.
You knock up a quote. You never attach T&Cs to your quotes, because usually you have to sign the builder’s subcontract, so it seems like a waste of time. There’s a lot of materials to order and you ask for an upfront deposit.
The builder sends an email accepting your quote. By some miracle (i.e., every other job you’re on is delayed), you can get started next week.
The builder is overjoyed, and the site manager books the induction in on Monday. You ask for a copy of the subcontract. This is a big project; you assume they have something drafted and ready to go.
The construction market in WA has gone from over-heated to super-heated. Everyone’s chasing their tails and it feels like there’s no time to deal with tedious details, like contracts.
But no… The builder has been so caught up on other crises, subcontracts haven’t been sorted yet. They’ll get something out to you soon but ask if you can just get onto the job site on Monday so they can start to recover some program.
Weeks go by, you’ve burned multi-seven figures in costs, there are all kinds of delays, you still haven’t received the upfront deposit and your other payment claims have been short paid. Things are getting nasty, and you call a lawyer to find out where you stand. The lawyer asks you for a copy of the subcontract. You start to feel nervous and sheepishly hand over the builder’s email accepting your quotation.
Great, the lawyer says – we can use the T&Cs that you had on your quote! There’s a deeply awkward silence as you wonder what to say.
Does this little scenario seem far-fetched? It isn’t. I’ve been the audience to that awkward silence several times in the last 3 months.
The moral of the story is that you should have some terms on your quotes. Here’s 3 reasons why:
T&Cs Make Your Quote Capable Of Forming A Real, Live Contract
Your terms and conditions don’t have to be 10 pages of legal gibberish. You can set out the deal breakers for your business (price, payment terms, program and variation management and termination) in less than a page.
If you’ve done that, and you find yourself in the little saga I wrote about above, happy days – when the builder accepts the quote, you have a contract. Not only that, but its terms are clear.
Manage Client Expectations And Streamline Negotiations
For most larger jobs, there will be a formal subcontract, and it will set aside the terms and conditions that you have on your quote.
But, if your deal breakers were on the quote (e.g., an up-front deposit or more favourable payment terms than the security of payment legislation), it makes it a lot easier to negotiate them into a subcontract that you receive from the builder. That’s because you’ve let your client know what they were in for, right at the outset.
Demonstrate That Your Business Is A Legit Professional Operation
The days of handshake deals are behind us. Professional businesses understand that it’s worthwhile capturing the terms of the deal in a written agreement, because that reduces the potential for arguments down the track.
If your business is growing, your clients will expect you to understand what’s involved in protecting your business. They know that business risk management is what helps you make a profit, and that means they’ll achieve a better project outcome.
Bigger clients aren’t going to be frightened off by your legal and commercial expectations appearing on the quotation. Far from it – they’ll know that they’re dealing with a worthy business partner.
This post was originally published on Business Foundations.