Subcontractor Agreement
A subcontractor agreement governs the engagement of a subcontractor to perform part of a project you have contracted to deliver to a primary client.
What is a Subcontractor Agreement?
A subcontractor agreement is a contract between a business and a subcontractor who performs part of a project that the business has contracted to deliver to a primary client. The subcontractor is engaged by the business, not by the end client, and the business remains responsible to the client for the overall delivery.
The key commercial risk in subcontracting is IP pass-through: if the subcontractor creates IP under your subcontract, you need that IP to pass through to your client under the primary contract. Without proper IP assignment from the subcontractor, you may promise IP ownership to your client that you cannot actually deliver.
When do you need a Subcontractor Agreement?
- ✓When engaging a specialist for work that exceeds your team's capacity or expertise
- ✓When overflow project work needs to be delegated to an external party
- ✓When your primary client contract permits subcontracting
- ✓When an external specialist will produce deliverables you are contractually obligated to provide
Key provisions to include
Subcontracted Services
Precise description of the work to be performed by the subcontractor.
IP Assignment
Full assignment of IP created in the engagement to the primary contractor for pass-through to the end client.
Confidentiality
The subcontractor cannot disclose client or project information — including the existence of the subcontracting relationship.
Non-Circumvention
Prevents the subcontractor from approaching the end client directly to establish their own relationship.
Fees & Payment
Rate, payment schedule, and any milestone-based payment tied to client acceptance.
Quality Standards
The standard to which the subcontractor's work must be performed.
Common mistakes to avoid
Not obtaining full IP assignment from the subcontractor, preventing the primary contractor from delivering IP ownership to the client
Not including a non-circumvention clause, allowing the subcontractor to approach the end client directly
Paying the subcontractor before receiving payment from the client — subcontract payment should be tied to client milestone payments
Frequently asked questions
Do I need to tell my client that I am using subcontractors?
This depends on your primary client contract. Many client service agreements require consent or notification for subcontracting. Review your client agreement carefully. If subcontracting is permitted without consent, you should still ensure the subcontractor is bound by the same confidentiality obligations as your own team.
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