How to Review a Subcontractor Agreement: a Clause-by-Clause Checklist (2026)

How do you review a subcontractor agreement? Review a subcontractor agreement by checking, before anything else, three things: what head-contract terms flow down onto the subcontractor, how and when the subcontractor gets paid, and how risk is shared through indemnities and liability caps. A subcontractor agreement sits beneath a main (or head) contract: the client hires a main contractor, and the main contractor hires subcontractors to do parts of the work. The main contractor's goal is to pass its own obligations down so it is not squeezed between client and subcontractor; the subcontractor's goal is to take on only what it can see and control. Read the agreement once for structure, then clause by clause against the checklist below, and always ask to see the head-contract terms it refers to. This article is general guidance, not legal advice. Construction and payment law varies by jurisdiction, so have a qualified professional review the agreement before you rely on it. ## The clause-by-clause checklist ### 1. Parties and the chain

Confirm the main contractor, the subcontractor, and that the agreement correctly identifies the project, the site and the head contract above it. Check whether the client has any direct rights against the subcontractor through a collateral warranty or third-party-rights clause. ### 2. Scope of work The subcontract scope must line up exactly with the slice of the head-contract works the subcontractor is taking. Look for gaps and overlaps: work that is in the head contract but not clearly in any subcontract is work the main contractor must do itself or dispute later. Tie the scope to drawings, specifications and a schedule of rates or quantities. ### 3. Flow-down (pass-through) clauses This is the clause that catches subcontractors out. The agreement often says the subcontractor is bound by the terms of the head contract "as if named as the contractor". That can import obligations, programme dates, liability and even dispute terms the subcontractor has never read. Insist on seeing the flowed-down clauses, and check that obligations flow down only so far as they apply to the subcontract works. ### 4. Price and payment Identify the price basis (lump sum, measured, or rates), the valuation and certification process, and the time for payment after certification. This is the most important commercial clause for a subcontractor. ### 5. Pay-when-paid and pay-if-paid Check for any clause that makes payment to the subcontractor conditional on the main contractor being paid by the client. Pay-when-paid delays payment; pay-if-paid can remove it entirely if the client never pays. Many jurisdictions restrict or ban these clauses, particularly on client insolvency, so verify the local law. In India, a registered micro or small enterprise may have statutory payment rights under the MSMED Act, 2006. ### 6. Retention and security Check whether retention is held, at what percentage, and when it is released, usually in two stages tied to practical completion and the end of the defects liability period. Note any requirement for a performance bond, bank guarantee or parent company guarantee. ### 7. Programme, delay and extensions of time Confirm the subcontractor's start and completion dates, how they relate to the main programme, and that there is an extension-of-time mechanism for delays caused by others. Check for liquidated or general damages for delay, and any obligation to accelerate. ### 8. Variations There must be a clear procedure for instructing and valuing changes to the subcontract works in writing. Check who may instruct variations and how they are priced and timed, mirroring the head-contract mechanism so the main contractor can pass claims up. ### 9. Defects liability Check the defects liability period and the duty to return and fix defects at the subcontractor's cost, usually aligned with the head contract so the main contractor's own obligation to the client is covered. ### 10. Indemnities and insurance Indemnities should be proportionate, covering the subcontractor's own negligence and breaches, not every loss on the project. Watch for a blanket indemnity that makes the subcontractor liable for losses it did not cause. Confirm the required insurances, amounts and that they are maintained. ### 11. Liability caps and exclusions Look for an overall cap on the subcontractor's liability and any exclusion of indirect or consequential loss. A subcontractor with uncapped liability on a small-value package carries risk out of all proportion to its fee. ### 12. Set-off, suspension and termination Check the main contractor's right to set off claims against sums due, the subcontractor's right to suspend for non-payment, and the grounds, notice and payment on termination. A one-sided set-off right with no suspension right for the subcontractor is a red flag. ### 13. Dispute resolution Confirm the governing law and forum, and whether disputes follow the head-contract process. In India, construction disputes often go to arbitration under the Arbitration and Conciliation Act, 1996. Check that the subcontractor is not bound into a dispute process it cannot afford or control. ## Red flags each side watches for A subcontractor should worry about: flow-down of the entire head contract sight unseen; pay-when-paid or pay-if-paid wording; retention with no release trigger; a one-way indemnity or set-off; uncapped liability; and no right to suspend for non-payment. A main contractor should worry about: a subcontract scope that does not fully cover its head-contract obligation, leaving a gap; programme dates that do not align, so a subcontractor delay does not entitle it to recover from the client; defects and warranty periods shorter than the head contract; and a dispute clause that stops it passing a claim up the chain. ## A note on jurisdiction Subcontract practice varies by jurisdiction, especially on payment. Several countries have construction payment legislation that restricts pay-when-paid clauses and gives subcontractors rights to interim payment and adjudication. In India, the MSMED Act, 2006 gives registered small suppliers statutory payment and interest rights, and standard forms differ internationally (FIDIC subcontract) and in the United Kingdom (such as JCT and NEC subcontracts). Check the governing law and any applicable payment statute before concluding a clause is enforceable. Last verified October 2026. ## Where a contract workspace helps The hard part of subcontract review is the flow-down: holding the head contract and the subcontract side by side, checking that obligations, dates and liability line up, and catching the payment wording that pushes risk down the chain. Doing that across many packages, as drafts change, is where gaps appear. Drafting a subcontract, reviewing it against the head contract, tracking payment, indemnity and completion dates, and governing every package on a project can run through one AI workspace tuned to how your company contracts. A tool like Adira is built so none of it ends up scattered across files.