Subcontract Risk and Drafting
The subcontract you are handed was drafted to move risk down the chain onto you. This guide shows an SME subcontractor exactly where that risk hides: back-to-back and flow-down incorporation, pay-when-paid clauses, uncapped liability and broad indemnities, wide set-off rights, and the dispute resolution forum. It also gives a practitioner's checklist for reviewing a subcontract before signature, which is the only moment the terms are still negotiable.
Use these insights to catch the clauses that quietly transfer unmanageable risk, and to negotiate the caps and carve-outs that protect your business.
In this guide
Back-to-Back Subcontracts: What You're Really Signing Up For
8 min readSubcontract RiskOnerous Clauses to Hunt For: Indemnities, Set-Off and Uncapped Liability
8 min readSubcontract RiskHow to Review a Construction Subcontract Before You Sign: A Practitioner's Checklist
8 min readSubcontract RiskRed Flags in a Subcontract Handed Down by the Main Contractor
8 min readReady to act on this?
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Frequently asked questions
What are the most dangerous clauses in a construction subcontract?
The clauses that most often harm an SME subcontractor are conditional-payment provisions (pay-when-paid, pay-if-paid), uncapped liability combined with broad indemnities, wide set-off and contra-charge rights, back-to-back flow-down of main-contract obligations that do not fit the subcontract scope, and liquidated damages without a workable extension-of-time mechanism. None look aggressive on the page, which is exactly why they are dangerous.
Should a subcontractor sign without seeing the main contract?
No, not where the subcontract incorporates the main contract on a back-to-back basis. Signing up to obligations you have not read is signing a blank cheque. Ask for the incorporated terms, limit flow-down to obligations relevant to your scope, and cap any back-to-back liability at the subcontract value rather than the main contract value.
How should an SME contractor review a subcontract before signing?
Work through the highest-risk provisions in a fixed order: payment and conditional-payment terms, the liability cap and indemnities, set-off and contra-charges, delay damages and the matching extension-of-time mechanism, flow-down of the main contract, and termination rights. For each clause ask who pays if it is triggered and whether the risk is one you can control. Anything that puts an unmanageable or unpriced risk on you is a negotiation point.
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