As a roofing company owner, protecting your business is essential. The construction industry can be a complicated and sometimes messy place. In some instances, multiple parties could be working together on a single project, meaning that boundaries need to be set and agreements need to be made to protect everyone involved from unfair risk. Risk is a significant element in the construction industry, and it can have a considerable impact on any given project—whether it be performance or cost-related.
When the risk is unfairly allocated to one party, it can cause businesses to lose valuable time and money, ultimately damaging their reputation. And one of the best ways you can protect your business from unfair risk is through roofing subcontractor agreements.
What is a roofing subcontractor agreement, and why does it matter?
A roofing subcontractor agreement is a contract between project managers or contractors and subcontractors. A roofing subcontractor agreement legally solidifies any agreement between the two parties to avoid unfair risk allocation.
Ultimately, the importance of an effective agreement with a subcontractor cannot be overstated. In the roofing industry, contractors utilize subcontractors’ services regularly to assist with numerous tasks and specialty jobs.
An effective agreement with a subcontractor can save contractors a tremendous amount of time, money, and frustration. Far too often, work between roofing contractors and subcontractors are handled informally and may end up exposing the roofing contractor to significant liability.
It’s essential that contractors have a written contract with each and every subcontractor they use, regardless of how small the job is that the subcontractor is doing. There are a few critical elements that must be included in an agreement to help provide everyone with maximum protection, and in this article, we’ll go through the essentials and provide you with a free, trustworthy template that you can use as a roofing business owner for your company.
A general contractor can avoid liability and other damaging situations with a well-thought-out contract. Roofing contractors should never be hesitant to dismiss a subcontractor that refuses to sign the roofing subcontract.
Negotiating your contract
When you begin negotiations, it’s important to keep these 5 things in mind:
Determine the scope of the work the roofing subcontractor will do.
Both parties must understand the specific job that is to be done, and how it will fit in with the roofing contractor’s existing schedule and deadlines.
Discuss and decide the working timeline.
The general contractor and subcontractor need to decide on a realistic timeline for completing the project. One thing that’s important to keep in mind is potential delays, such as rain or other weather-related events that might slow project competition.
Decide who will provide materials and when and where they will be delivered.
If the roofing subcontractor needs separate materials to complete their part of the project, the two parties must decide which party is responsible for purchasing those materials. The two parties must also decide when and where they will be delivered to avoid unnecessary waste of time and resources.
Confirm payment methods and terms.
As stated above, it’s important to agree upon the amount the general contractor will pay the subcontractor, when they will be paying them, and how they will be paying them.
Consider what should happen in the event of a breach of contract.
If the roofing contractor plans to pass additional costs or penalties on to the subcontractor, that should be discussed ahead of time to avoid misunderstandings. Further discussion and negotiation is common in this stage. If necessary, have another roofing contractor or even an attorney look over the document as well.
Drafting your contract.
When you begin drafting your contract, it’s important to keep the following 8 things in mind:
Identify the parties.
The document should begin with providing the individual names of the two people signing the agreement and business names if applicable. Ensure contact information such as addresses and phone numbers for both the roofing contractor and the subcontractor.
Don’t forget to include all parties’ legal status—whether they’re an LLC, sole proprietor, corporation, and so on. How each party is organized potentially alters their liability under the contract.
Define the scope of work to be done.
Describe exactly what the roofing contractor is expecting from the roofing subcontractor. You want these descriptions to be as specific as possible. These clauses help to ensure that there’s no miscommunication between the subcontractor and roofing contractor.
If it turns out that the roofing client is unhappy with some element of the subcontractor’s job, the document should make it clear under what circumstances the subcontractor is expected to go back and fix the work.
List the rights and duties of each party.
If you’ve agreed that specific parties will be responsible for inspections or for completion of any prerequisites, those should be included in the contract.
As a roofing contractor, you could consider including a clause that reserves you the right to inspect the subcontractor’s work at any time.
Create job completion and payment schedules.
Provide deadlines for each phase of the job to be completed to set expectations ahead of time.
Set up a payment schedule according to the decision both parties came to. If the payment is made in chunks, create milestones for the payments. If it’s being paid in a lump sum, confirm the date upon which the roofing subcontractor will be paid, how much they will be paid, and how they will be paid.
Provide warranty and compensation clauses.
Here, the subcontractor typically warrants their work against material defects or craftsmanship for a specific period of time. During this time, they do not hold the roofing contractor accountable for claims or losses connected to the subcontractor’s work.
An important thing to note is that compensation clauses shouldn’t be one sided. If the subcontractor compensates the general contractor against claims or losses from their work, the roofing contractor should compensate the subcontractor.
Agree on reasons why the agreement can be terminated.
Typically, the roofing subcontractor agreement can be terminated by the general roofing contractor for the same reasons the client can terminate the general roofing contractor agreement.
Include the effective dates of the contract, along with a final date for completion of the project.
Include any necessary miscellaneous provisions.
Nearly every document includes clauses known as “boilerplate provisions,” which cover issues, including what state’s law governs the contract and where a lawsuit for breaches can be filed.
Sign your agreement.
Both the subcontractor and the roofing contractor must sign the document to be legally binding and enforceable.
Subcontractor agreements vs. performance bonds vs. payment bonds
One alternative to a subcontractor agreement is a performance bond. A performance bond is often used in construction and is issued by general contractors to subcontractors to guarantee against the general contractor’s failure to meet their obligations under the contract or to deliver on the level of performance specified in the agreement. Performance bonds are usually required for government-related construction projects such as building a bridge or road constructions, so the use of performance bonds may be less common for private business owners.
Another alternative to a subcontractor agreement is a payment bond. Payment bonds guarantee often used in construction which states that the contractor will pay all individuals on the subcontracting end, including laborers, material suppliers, and contractors included in the agreement.
Performance bonds and payment bonds may not cover clauses such as warranty and compensation, what happens in the case of a breached contract, or other miscellaneous provisions that may be critical for your roofing-specific deals. Because of that, a subcontractor agreement is often a more thorough, secure option for roofing companies.
The importance of a roofing subcontractor agreement cannot be overstated.
Whether you’re the roofing contractor or the roofing subcontractor, these legally binding agreements are an essential part of risk allocation management, and they’re crucial for your business. Especially in the construction industry, where there’s already enough inherent risk, failing to protect your business from unnecessary issues can be detrimental to your company. By taking the steps to conceive a thoughtfully crafted agreement, you can stop fretting about potential harm and start focusing on other important elements of your business.
Get started on your contract with Podium’s free roofing subcontractor agreement template today.