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To protect your business and the subcontractor you employ, it is important to establish the terms of the work they will complete in a written contract and agree it, before bringing them on board. Such a contract may include: Payment amounts and dates/milestones.

A memorandum of understanding (MOU) is a starting point of negotiations between multiple parties to signal the intent of doing business or coming to an agreement. It simplifies a legal contract by establishing the key objectives and goals.

8 things a subcontractor agreement should include Business information. Include names, businesses names, and contact information for both the subcontractor and the hiring contractor. ... Scope of work. ... Payment terms. ... Change orders. ... Licensing and insurance coverage. ... Dispute resolution. ... Termination clause. ... Flow-down provisions.

An MOU is typically drawn up between a general contractor and subcontractor or a project owner. An MOU between two construction companies is frequently used to begin the relationship and set the tone between contractors before the issuing of a formal contract.

A construction MOU indicates the impending signing of a contract, but it does not bind the parties. After the memo is signed, either party may decide not to form a contract at any time without the other party having any legal recourse. Don't, however, assume that a memo is always non-binding.

You should provide every subcontractor a clear description of the work they will undertake before going any further in the process. A subcontractor agreement should clearly and comprehensively outline the employment relationship. The agreement should cover these components: Project objectives.