Subcontractor Agreement (US)
Subcontractor services agreement with US state-specific legal options
SUBCONTRACTOR AGREEMENT
This Subcontractor Agreement (this "Agreement") is entered into as of [effective date] (the "Effective Date") by and between:
Contractor: [contractor legal name], a [contractor state of formation] [contractor entity type] with an address at [contractor address] ("Contractor"); and
Subcontractor: [subcontractor legal name], a [subcontractor state of formation or 'individual'] [subcontractor entity type] with an address at [subcontractor address] ("Subcontractor").
Contractor and Subcontractor are each a "Party" and together the "Parties."
BACKGROUND
A. Contractor has entered into a prime contract or engagement with [client / customer name] (the "Client") to perform certain work (the "Prime Work").
B. Contractor wishes to sub-contract a portion of the Prime Work to Subcontractor, and Subcontractor is willing to perform such work on the terms set out in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set out below, the Parties agree as follows:
1. SERVICES AND DELIVERABLES
Note: This section defines exactly what the Subcontractor will do and what they will deliver. Be as specific as possible — vague scope descriptions are one of the most common sources of disputes. If the work is complex, attach a detailed scope of work as Exhibit A.
1.1 Services. Subcontractor will perform the services described in Exhibit A (Key Commercial Terms) (the "Services") in a professional and workmanlike manner, in accordance with the terms of this Agreement and any requirements of the Prime Work.
1.2 Deliverables and Acceptance. Subcontractor will deliver the work product described in Exhibit A (the "Deliverables") by the dates in Exhibit A. Deliverables are accepted when delivered unless Contractor notifies Subcontractor in writing within [acceptance period, e.g., 10] days that a Deliverable does not materially conform to the requirements in Exhibit A.
1.3 Changes. Any material change to scope, timeline, or fees must be agreed in writing by both Parties before Subcontractor performs the changed work. Contractor may not unilaterally change the scope of the Services without Subcontractor's written consent.
Note: Playbook note (Module 4.3): Avoid scope descriptions that look like 'any tasks as assigned' — that kind of unlimited scope creates classification risk and payment disputes. Define outcomes and deliverables, not just activities.
2. TERM AND TERMINATION
2.1 Term. This Agreement starts on the Effective Date and continues until [end date or 'completion of the services'], unless terminated earlier under this Section 2 (the "Term").
2.2 Termination for Convenience. Either Party may terminate this Agreement for any reason by giving the other Party at least [notice period, e.g., 14] days' written notice.
Note: Market standard for termination notice in SME subcontractor agreements is 14–30 days. Market-standard language: 'on [30] days' prior written notice to the other Party.' A 30-day period is more contractor-friendly; 14 days is more contractor-side-aggressive. For short fixed-price projects, consider allowing immediate termination on payment for work done.
2.3 Termination for Cause. Either Party may terminate this Agreement immediately by written notice if the other Party: (a) materially breaches this Agreement and does not cure the breach within [cure period, e.g., 10] days after receiving written notice of the breach; (b) becomes insolvent, makes an assignment for the benefit of creditors, or has an insolvency proceeding commenced against it that is not dismissed within 60 days; or (c) commits fraud or willful misconduct in connection with this Agreement.
2.4 Effect of Termination. On termination or expiry: (a) Subcontractor will promptly deliver to Contractor all completed and materially completed Deliverables paid for; (b) Contractor will pay all undisputed fees for Services properly performed up to the termination date; and (c) each Party will return or destroy the other's Confidential Information as provided in Section 6. Sections 6 (Confidentiality), 7 (Intellectual Property), 11 (Indemnification), 12 (Limitation of Liability), 16 (Dispute Resolution), and 17 (Governing Law) survive termination.
3. FEES, INVOICING, AND EXPENSES
3.1 Fees. Contractor will pay Subcontractor the fees described in Exhibit A.
Note: Market-standard payment terms for US subcontractor/freelance agreements are Net 30 (30 days after receipt of a valid invoice). Net 15 is more Contractor-aggressive; Net 60 is common in enterprise supply chains. Market-standard language: 'Contractor will pay undisputed invoices within [30] days of receipt of a correct invoice.' NYC Freelance Isn't Free Act (Admin. Code Section 20-928) and NY State GBL Article 44-A require timely payment and mandate specific written contract terms for engagements over $800. Illinois Freelance Worker Protection Act (820 ILCS 195) imposes similar requirements. Check these statutes if Subcontractor works from NY or IL. [verify: confirm current thresholds at the relevant state/city statute before signing.]
3.2 Invoicing and Payment. Subcontractor will submit invoices on the schedule in Exhibit A. Contractor will pay undisputed amounts within [payment terms, e.g., 30] days of receipt of a correct invoice. Time of payment is not of the essence.
3.3 Late Payment. If Contractor fails to pay an undisputed amount by the due date, Subcontractor may charge interest at the rate of [late interest rate, e.g., 1.5%] per month (or the maximum rate permitted by applicable law, if lower) on amounts overdue, accruing daily from the due date until paid in full.
3.4 Disputed Invoices. If Contractor disputes an invoice in good faith, Contractor will notify Subcontractor in writing within [dispute window, e.g., 10] days of receipt, specifying the disputed items, and will pay the undisputed portion on time while the Parties resolve the dispute.
3.5 Expenses. Contractor will reimburse pre-approved, reasonable out-of-pocket expenses as described in Exhibit A, provided Subcontractor submits itemized receipts.
Note: Delete Section 3.5 if expenses are included in the fee or not reimbursable. If you include expenses, set a pre-approval threshold (e.g., 'expenses over $[X] require prior written approval') to prevent disputes.
3.6 Taxes. Subcontractor is responsible for all taxes, withholdings, and statutory obligations applicable to Subcontractor and Subcontractor's personnel arising from payments under this Agreement. Contractor will not withhold income taxes, Social Security, Medicare, or other employment taxes from payments to Subcontractor unless required by law. Each Party is responsible for filing its own tax returns.
Note: Playbook note (Module 4.7): The Contractor should collect a completed IRS Form W-9 from the Subcontractor before making the first payment. If total payments are expected to reach $600 or more in a calendar year, a Form 1099-NEC will typically be required. Tax labels in the contract do not control legal classification — IRS applies a common-law control analysis. [verify current irs thresholds at irs.gov]
4. INDEPENDENT CONTRACTOR STATUS
Note: This is one of the highest-risk sections in any subcontractor agreement. The law — not the label you put in this contract — determines whether your Subcontractor is treated as an employee or an independent contractor. Getting this wrong can result in back taxes, benefits claims, and penalties. Pick the right option below based on where the Subcontractor will actually perform the services.
Note: Use either Option A, Option B, or Option C. Use Option A if services are performed in California. Use Option B if services are performed in Massachusetts or New Jersey. Use Option C for all other states. If services are performed in multiple states, consult counsel — you may need multiple addenda.
Option A (California): Subcontractor is an independent contractor and not an employee of Contractor. The Parties intend to comply with California's worker-classification rules, including the ABC test reflected in California Lab. Code Section 2775. Subcontractor represents that it operates an independently established business in performing the Services. Subcontractor is solely responsible for all taxes, withholdings, and statutory obligations applicable to Subcontractor and Subcontractor's personnel (if any), including payroll taxes, unemployment insurance, and workers' compensation.
Note: California warning (Playbook Module 4.1 [blocker | ca]): California's AB5 law (Lab. Code Section 2775 et seq.) creates a strong presumption that workers are employees unless you can satisfy all three prongs of the ABC test: (A) the worker is free from the company's control and direction in performing the work; (B) the work is outside the company's usual course of business; and (C) the worker customarily operates an independently established trade, occupation, or business of the same nature. Many exemptions exist (e.g., licensed professionals, certain business-to-business services). If you cannot satisfy the ABC test for your specific engagement, do not use this agreement for California-based workers — seek legal advice. [verify current exemptions at california lab. code section 2775 et seq. and california business and professions code section 16600.]
Option B (Massachusetts / New Jersey): Subcontractor is an independent contractor and not an employee of Contractor. The Parties intend to comply with any applicable 'ABC test' or similar worker-classification standard that applies based on where the Services are performed, including Massachusetts Gen. Laws ch. 149 Section 148B and New Jersey's ABC-test framework under N.J. Stat. Section 43:21-19(i)(6)(A)-(C). Subcontractor represents that it operates an independently established business in performing the Services and is responsible for all taxes and statutory obligations applicable to Subcontractor and Subcontractor's personnel (if any).
Note: Massachusetts and New Jersey warning (Playbook Module 4.1 [blocker | ma] [blocker | nj]): Both states apply strict ABC tests that make it difficult to classify workers as independent contractors if they perform the company's core services or work under close direction. In Massachusetts, the Department of Labor enforces this vigorously. In New Jersey, the ABC test applies across multiple statutes (unemployment, wage-and-hour). If the Subcontractor's services are central to your core business offering, or if they work under day-to-day supervision, you may not be able to satisfy these tests. Seek legal advice before proceeding. [verify current statutory text at mass. gen. laws ch. 149 section 148b and n.j. stat. section 43:21-19.]
Option C (All Other States): Subcontractor is an independent contractor and not an employee of Contractor. Subcontractor is responsible for all taxes, withholdings, and statutory obligations applicable to Subcontractor and Subcontractor's personnel (if any) and will not be eligible for any Contractor employee benefits. The Parties intend this Agreement to reflect an independent business relationship consistent with applicable federal and state law, including the IRS common-law control test.
Note: Federal classification note (Playbook Module 4.1 [high risk | dol] [high risk | irs]): Even outside CA, MA, and NJ, the IRS and the Department of Labor apply fact-based tests to determine whether a worker is an employee. The contract label 'independent contractor' does not control. Key factors include: who controls how the work is done (behavioral control), whether the worker has profit/loss risk (financial control), and the nature of the relationship (written agreements, benefits, permanence, integral work). Misclassification can result in unpaid payroll taxes, FICA, and penalties under 26 U.S. Code Section 3509. Maintain a classification memo for any long-term or high-value engagement. [verify current dol and irs guidance at dol.gov and irs.gov.]
5. SUBCONTRACTING AND PERSONNEL
5.1 No Unapproved Subcontracting. Subcontractor will not further subcontract the Services or assign performance to another person without Contractor's prior written consent, except for administrative support that does not involve access to Contractor's Confidential Information or systems.
5.2 Responsibility. If Contractor consents to subcontracting, Subcontractor remains fully responsible for the quality, timely completion, and compliance of the Services, and for the acts and omissions of its sub-subcontractors.
5.3 Key Personnel. The Services are to be personally performed by [key person name]. Subcontractor will not substitute or replace that individual without Contractor's prior written consent.
Note: Delete Section 5.3 if personal performance by a specific individual is not required. Requiring personal performance can strengthen classification as a true contractor relationship. However, prohibiting substitution entirely can signal employee-like control under some state tests.
6. CONFIDENTIALITY
6.1 Definition. "Confidential Information" means non-public information disclosed by or on behalf of Contractor (or the Client) to Subcontractor in connection with this Agreement, including business plans, product information, client information, pricing, source code, security information, and any Deliverables before public release. Confidential Information does not include information that Subcontractor can show: (a) is or becomes public through no fault of Subcontractor; (b) was already known to Subcontractor without restriction when received; (c) was independently developed by Subcontractor without using Confidential Information; or (d) was rightfully received from a third party without a duty of confidentiality.
6.2 Obligations. Subcontractor will: (a) use Confidential Information only to perform the Services; (b) not disclose it to any third party except as permitted under this Section 6; and (c) protect it using at least the same standard of care it uses to protect its own confidential information, and in no event less than reasonable care.
6.3 Permitted Disclosures. Subcontractor may disclose Confidential Information to its personnel and approved sub-subcontractors who need to know it for the Services, provided they are bound by confidentiality obligations at least as protective as this Section 6. Subcontractor may disclose Confidential Information as required by law, court order, or regulatory authority, provided Subcontractor gives Contractor prompt written notice (where legally permitted) so Contractor may seek a protective order.
6.4 Return and Deletion. On Contractor's request or at the end of the Term, Subcontractor will promptly return or securely delete all Confidential Information, except that Subcontractor may retain one archival copy solely for legal or compliance purposes, subject to ongoing confidentiality obligations.
6.5 Survival. This Section 6 survives termination or expiry of this Agreement for a period of [confidentiality survival period, e.g., 3 years], or indefinitely with respect to information that qualifies as a trade secret under applicable law.
Note: Confidentiality survival: market standard is 3–5 years for general confidential information; indefinite for trade secrets. Market-standard language: 'for a period of [3] years following the termination of this Agreement, or indefinitely for information that constitutes a trade secret.' DTSA notice required for trade secrets (Playbook Module 4.9 [high risk | dtsa]): To preserve the right to seek exemplary damages and attorneys' fees under the Defend Trade Secrets Act (18 U.S. Code Section 1836) for an individual's misappropriation of trade secrets, you must include the whistleblower immunity notice below. Omitting it does not void the confidentiality clause but limits your federal remedies.
6.6 DTSA Whistleblower Immunity Notice. Pursuant to 18 U.S. Code Section 1833(b), an individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Nothing in this Agreement is intended to limit Subcontractor's rights under applicable whistleblower protection laws.
7. INTELLECTUAL PROPERTY AND WORK PRODUCT
Note: IP ownership is one of the most negotiated points in subcontractor agreements. The key question is: does Contractor need to own the Deliverables outright, or is a licence enough? For most commercial arrangements, full assignment (ownership transfer) is standard and gives the Contractor maximum flexibility. BLOCKER: Do not rely on 'work made for hire' alone to establish ownership — for independent contractors, the US Copyright Act (17 U.S. Code Section 101) limits work-for-hire to specific categories of commissioned works and requires a signed written instrument. Always include an express assignment as a backup. [verify at 17 u.s. code section 101 and section 204.]
7.1 Definitions. "Work Product" means all Deliverables and other works, inventions, designs, documentation, code, and reports created by Subcontractor for Contractor under this Agreement, excluding Subcontractor Background IP. "Background IP" means tools, templates, know-how, software, and other materials that Subcontractor owned or developed before the Effective Date, or developed outside the Services without using Contractor Confidential Information.
Note: Use either Option A, Option B, or Option C for IP ownership. Use Option A if Contractor is based in California or services are primarily performed in California. Use Option B if the agreement is governed by New York or Delaware law. Use Option C for all other states.
Note: Option A includes a California Lab. Code Section 2870 carve-out that limits assignment of inventions the Subcontractor developed entirely on their own time without using company resources. Options B and C include a full assignment with fallback licence. All three options preserve Subcontractor's Background IP and provide a licence back where Background IP is incorporated into Work Product.
Option A (California): Contractor will own all right, title, and interest in Work Product upon creation. Subcontractor hereby irrevocably assigns to Contractor all right, title, and interest (including all intellectual property rights) in Work Product to the maximum extent allowed by law. To the extent any assignment is not effective, Subcontractor grants Contractor a perpetual, worldwide, royalty-free, irrevocable, sublicensable licence to use, modify, reproduce, distribute, and create derivative works of the Work Product for Contractor's business. This Section 7 does not apply to any invention that qualifies for exclusion under California Lab. Code Section 2870 (inventions developed entirely on Subcontractor's own time without using Contractor equipment, supplies, facilities, or trade secret information, and that do not relate to Contractor's business or anticipated research).
Option B (New York / Delaware): Contractor will own all right, title, and interest in Work Product upon creation. Subcontractor hereby irrevocably assigns to Contractor all right, title, and interest (including all intellectual property rights) in Work Product. To the extent any assignment is not effective, Subcontractor grants Contractor a perpetual, worldwide, royalty-free, irrevocable, sublicensable licence to use, modify, reproduce, distribute, and create derivative works of the Work Product for Contractor's business.
Option C (All Other States): Contractor will own all right, title, and interest in Work Product upon creation. Subcontractor hereby irrevocably assigns to Contractor all right, title, and interest (including all intellectual property rights) in Work Product. To the extent any assignment is not effective, Subcontractor grants Contractor a perpetual, worldwide, royalty-free, irrevocable, sublicensable licence to use, modify, reproduce, distribute, and create derivative works of the Work Product for Contractor's business.
7.2 Background IP Licence. Subcontractor retains ownership of Background IP. If any Background IP is incorporated into Work Product, Subcontractor grants Contractor a perpetual, worldwide, royalty-free, irrevocable, sublicensable licence to use, modify, reproduce, distribute, and create derivative works of that Background IP solely as needed to use the Work Product for Contractor's business.
7.3 Moral Rights Waiver. To the extent permitted by applicable law, Subcontractor waives (and will cause its personnel to waive) any moral rights or similar rights in the Work Product.
7.4 Further Assurance. Subcontractor will sign, execute, and deliver all additional documents and instruments reasonably required to evidence or perfect Contractor's ownership of Work Product, at Contractor's reasonable expense.
Note: Market-standard IP language: 'Subcontractor hereby irrevocably assigns to Contractor all right, title and interest in and to the Work Product, including all intellectual property rights therein.' Full assignment is the market-standard position for work-for-hire-style engagements (Atlassian, Stripe, and most US tech company contractor agreements use full assignment language). A licence-only approach is less common but appropriate where Subcontractor retains a reusable deliverable or platform that they license to multiple clients.
8. DATA SECURITY AND PRIVACY
Note: [optional] Include this Section 8 only if Subcontractor will access, process, or store personal information, customer data, or system credentials. If Subcontractor will not handle any personal data or client data, you can delete this section entirely.
8.1 Security Obligations. Subcontractor will implement and maintain reasonable administrative, technical, and physical safeguards designed to protect Contractor data against unauthorised access, disclosure, or misuse, consistent with industry standards for comparable data types.
8.2 Security Incidents. Subcontractor will notify Contractor without undue delay — and in any event within [incident notification period, e.g., 48 hours] — after becoming aware of any unauthorised access to Contractor data that materially affects confidentiality, integrity, or availability (a "Security Incident"), and will reasonably cooperate with Contractor's response and remediation.
Note: Use either Option A, Option B, or Option C for the applicable privacy law clause. Use Option A if Contractor's business is subject to California privacy law (CCPA/CPRA) and the data involved includes California consumers' personal information. Use Option B if the agreement is governed by New York law or Contractor is subject to SHIELD Act obligations. Use Option C for all other states.
Option A (California — CCPA/CPRA): To the extent applicable, the Parties will comply with the California Consumer Privacy Act and related California privacy laws, including California Civ. Code Section 1798.100 et seq. Subcontractor will process personal information only on documented instructions from Contractor and will not 'sell' or 'share' personal information (as defined under applicable California law) in performing the Services.
Note: California privacy note: If Contractor is a 'business' subject to the CCPA/CPRA (California Civ. Code Section 1798.100 et seq.) and shares personal information with the Subcontractor, the Subcontractor is likely a 'service provider' under that law. A written contract with specific terms is required to qualify for the service-provider exemption. Consult the CPRA text for mandatory contract provisions. [verify at california civ. code section 1798.100 et seq. and california privacy protection agency regulations.]
Option B (New York): The Parties will comply with applicable New York privacy and data security laws, including the New York SHIELD Act (N.Y. Gen. Bus. Law Section 899-bb). Subcontractor will implement reasonable data security safeguards appropriate to the nature and scope of the personal information it processes.
Option C (All Other States): The Parties will comply with all applicable federal and state privacy and data security laws. Subcontractor will process personal information only as needed to provide the Services and will not use personal information for any other purpose without Contractor's written consent.
9. NON-SOLICITATION AND NON-COMPETITION
Note: [optional] This entire section is optional. Many SMEs choose to rely on confidentiality and IP ownership protections instead of non-competes, which reduces enforceability risk and avoids blocking the Subcontractor's other work. Include this section only if you have a specific, demonstrable business need.
9.1 Non-Solicitation of Personnel. During the Term and for [non-solicit restriction period, e.g., 12] months after, Subcontractor will not knowingly solicit for employment or contracting any employee or contractor of Contractor with whom Subcontractor had material contact through the Services. This does not prohibit general job postings not targeted at Contractor personnel.
9.2 Non-Solicitation of Clients. During the Term and for [non-solicit restriction period, e.g., 12] months after, Subcontractor will not knowingly solicit Contractor's clients or prospective clients with whom Subcontractor had material contact through the Services, for the purpose of providing substantially similar services.
Note: Use either Option A, Option B, or Option C for the non-competition clause. Use Option A if the agreement is governed by California law or services are primarily performed in California. Use Option B if the agreement is governed by Texas law. Use Option C for all other states — but only if you have a specific, narrow business need.
Option A (California — No Non-Compete): No non-competition restriction applies. The Parties acknowledge that most non-compete restrictions applicable to employees and contractors are void in California under California Business and Professions Code Section 16600. Subcontractor is free to perform services for other clients, including competitors.
Option B (Texas): During the Term and for [non-compete restriction period] months after, Subcontractor will not provide [restricted services description] to [named competitors or competitive category] within [geographic scope], but only to the extent the restriction is enforceable under Texas Business and Commerce Code Section 15.50, which requires the covenant to be ancillary to an otherwise enforceable agreement and reasonable as to time, scope, and geography.
Note: Texas non-compete note: Texas enforces non-competes if they are tied to a legitimate business interest and the restrictions are reasonable. Courts can reform (narrow) overbroad restrictions rather than invalidate them. Market-standard language: 'only to the extent the restriction is enforceable under applicable law.' [verify at texas business and commerce code section 15.50.]
Option C (All Other States): During the Term and for [non-compete restriction period] months after, Subcontractor will not provide [restricted services description] to [named competitors or competitive category] within [geographic scope], but only to the extent the restriction is enforceable under applicable law.
Note: Non-compete enforceability varies widely by state. Many states (MN, OK, ND, and others) have banned or severely restricted non-competes for workers at or below certain income thresholds. The FTC issued a rule in 2024 seeking to ban most non-competes nationally, but its enforceability remains subject to ongoing litigation. Non-solicitation of employees and customers is generally easier to enforce than broad non-competes. Market-standard restriction periods: 6–12 months for subcontractors; 12–24 months for senior roles. [verify current state law and ftc rule status before including any non-compete.]
10. REPRESENTATIONS AND WARRANTIES
10.1 Authority. Each Party represents and warrants that it has the right, power, and authority to enter into this Agreement and perform its obligations, and that this Agreement is a binding and enforceable obligation.
10.2 No Conflicts. Subcontractor represents and warrants that performing the Services will not violate any agreement it has with a third party, and that Subcontractor will not knowingly use any third party's confidential information in performing the Services.
10.3 Professional Standard. Subcontractor represents and warrants that the Services will be performed in a professional and workmanlike manner consistent with industry standards, and that the Deliverables will materially conform to the specifications in Exhibit A.
10.4 No Infringement. Subcontractor represents and warrants that the Work Product (as delivered by Subcontractor and used as intended) will not, to Subcontractor's knowledge, infringe, misappropriate, or violate any third party's intellectual property rights in the United States.
10.5 Licences and Compliance. Subcontractor represents and warrants that it holds all licences, permits, and registrations required to perform the Services and will maintain them throughout the Term.
11. INDEMNIFICATION
11.1 By Subcontractor. Subcontractor will indemnify, defend, and hold harmless Contractor (and its officers, directors, employees, and agents) from third-party claims, damages, liabilities, and reasonable legal fees arising out of or relating to: (a) Subcontractor's breach of any representation, warranty, or obligation in this Agreement; (b) Subcontractor's gross negligence or willful misconduct; (c) bodily injury, death, or property damage caused by Subcontractor in performing the Services; or (d) a claim that the Work Product (as delivered by Subcontractor and used as intended) infringes a third party's US intellectual property rights, excluding any claim caused by Contractor materials, Contractor instructions, or Contractor modifications.
11.2 By Contractor. Contractor will indemnify, defend, and hold harmless Subcontractor from third-party claims, damages, liabilities, and reasonable legal fees arising out of or relating to: (a) Contractor-provided materials or instructions that cause a third-party claim, including intellectual property claims, provided Subcontractor used those materials or instructions as authorised; or (b) Contractor's gross negligence or willful misconduct.
11.3 Process. The indemnified Party will: (a) promptly notify the indemnifying Party in writing of any claim; (b) give the indemnifying Party sole control of the defence and settlement; and (c) reasonably cooperate. The indemnifying Party may not settle any claim in a way that imposes non-monetary obligations or admissions on the indemnified Party without the indemnified Party's prior written consent (not to be unreasonably withheld).
12. LIMITATION OF LIABILITY
Note: Use either Option A, Option B, or Option C. Use Option A if the agreement is governed by Massachusetts or New Jersey law. Use Option B if the agreement is governed by California, New York, or Delaware law. Use Option C for all other states.
Option A (Massachusetts / New Jersey): Except for (i) either Party's indemnification obligations, and (ii) Subcontractor's breach of Section 6 (Confidentiality) or Section 7 (Intellectual Property), each Party's total liability to the other under this Agreement will not exceed the amounts paid or payable by Contractor to Subcontractor in the [liability cap period, e.g., 12] months before the event giving rise to the claim. Neither Party will be liable for lost profits or lost revenue to the extent not recoverable under applicable law.
Note: Massachusetts / New Jersey note: Courts in these states may limit the enforceability of blanket 'no consequential damages' waivers, particularly in consumer or employment contexts. A clear monetary cap (1× fees paid in the prior 12 months) provides more predictable protection than relying solely on damage-category exclusions.
Option B (California / New York / Delaware): Except for (i) either Party's indemnification obligations, and (ii) Subcontractor's breach of Section 6 (Confidentiality) or Section 7 (Intellectual Property), each Party's total liability to the other under this Agreement will not exceed the amounts paid or payable by Contractor to Subcontractor in the [liability cap period, e.g., 12] months before the event giving rise to the claim. Neither Party will be liable for indirect, incidental, special, consequential, or punitive damages, even if advised of the possibility of such damages.
Option C (All Other States): Except for (i) either Party's indemnification obligations, and (ii) Subcontractor's breach of Section 6 (Confidentiality) or Section 7 (Intellectual Property), each Party's total liability to the other under this Agreement will not exceed the amounts paid or payable by Contractor to Subcontractor in the [liability cap period, e.g., 12] months before the event giving rise to the claim. Neither Party will be liable for indirect, incidental, special, consequential, or punitive damages, to the extent permitted by applicable law.
Note: Liability cap benchmark: Caps of 1× fees paid in the prior 12 months are standard in most US SME service agreements (comparable to Atlassian, HubSpot, and Mailchimp subcontractor and vendor terms). Caps below 1× fees are aggressive toward the Subcontractor and commonly pushed back on. For high-risk engagements (access to sensitive systems, customer-facing work), some agreements set a 2× cap or higher for specific breach categories. Market-standard language: 'in no event will [party's] total liability exceed the fees paid by Contractor in the twelve (12) months immediately preceding the claim.' [verify: consequential damages waivers may not be enforceable in all contexts; seek legal advice for high-value engagements.]
13. INSURANCE
Note: [optional] Include this section if the Services involve onsite work, access to sensitive systems or data, or meaningful third-party risk. Delete it for simple remote services engagements where the risks are low.
Subcontractor will maintain, at its own cost, the following insurance coverage during the Term and for [insurance tail period, e.g., 1 year] after: [e.g., general liability ($1m per occurrence / $2m aggregate), professional liability / e&o ($1m per occurrence), cyber liability ($1m per occurrence — if handling data)]. Subcontractor will provide certificates of insurance to Contractor upon request.
14. FORCE MAJEURE
Neither Party will be liable for delays or failures in performance caused by circumstances beyond that Party's reasonable control ("Force Majeure Event"), including natural disasters, acts of war, terrorism, strikes (other than by that Party's own employees), government actions, or widespread utility or infrastructure failures. Inability to pay money is not a Force Majeure Event. The affected Party must: (a) notify the other Party promptly of the Force Majeure Event and its expected duration; (b) use reasonable efforts to minimise its effects; and (c) resume performance as soon as reasonably practicable. If a Force Majeure Event continues for more than [force majeure threshold, e.g., 30] consecutive days, either Party may terminate this Agreement by written notice, and Contractor will pay Subcontractor for all Services properly performed up to the date of termination.
15. COMPLIANCE WITH LAW
Each Party will comply, and will ensure that its personnel and approved subcontractors comply, with all applicable laws, regulations, and government orders relevant to the performance of this Agreement. Subcontractor represents that it has not offered, promised, or given any bribe, kickback, or improper payment in connection with this Agreement, and will not do so. Subcontractor will comply with all applicable anti-corruption laws, including the US Foreign Corrupt Practices Act (15 U.S. Code Section 78dd-1 et seq.) to the extent applicable to its activities.
16. DISPUTE RESOLUTION
16.1 Good Faith Escalation. If a dispute arises relating to this Agreement, the Parties will first attempt to resolve it through good-faith negotiation. Either Party may initiate the process by written notice (a "Dispute Notice"). Within 10 business days of a Dispute Notice, the Parties' representatives will meet (in person, by video, or by phone) to attempt resolution.
16.2 Escalation to Senior Leadership. If the dispute is not resolved within 10 business days of the first meeting, it will be referred to senior representatives of each Party (or, if a sole trader, the individual themselves), who will meet within 10 business days to attempt resolution.
16.3 Formal Proceedings. If the dispute is not resolved within 30 days of the original Dispute Notice, either Party may commence formal proceedings in accordance with Section 17. Nothing in this Section 16 prevents a Party from seeking urgent injunctive or other equitable relief at any time.
Note: Many US subcontractor agreements for SMEs use a simple escalation-then-court structure (no mandatory arbitration). Mandatory arbitration clauses can be valuable for cost control but may not be enforceable against certain workers (e.g., transportation workers under 9 U.S. Code Section 1, the Federal Arbitration Act exemption). If you want arbitration, add an arbitration clause here specifying the rules (e.g., AAA Commercial Arbitration Rules), the seat, and the number of arbitrators. [verify faa applicability at 9 u.s. code section 1 for any worker engaged in interstate commerce.]
17. GOVERNING LAW AND VENUE
Note: Use either Option A, Option B, or Option C. Use Option A if you want a commonly used commercial governing law (New York). Use Option B if your company is incorporated in Delaware and you want Delaware law. Use Option C if you prefer the law of the state where services are performed or where the Contractor is located.
Option A (New York): This Agreement is governed by the laws of the State of New York, without regard to its conflict-of-laws rules. The state and federal courts located in [venue city, e.g., new york county, new york] will have exclusive jurisdiction over any dispute, and each Party irrevocably consents to personal jurisdiction and venue in those courts.
Option B (Delaware): This Agreement is governed by the laws of the State of Delaware, without regard to its conflict-of-laws rules. The state and federal courts located in [venue city, e.g., new castle county, delaware] will have exclusive jurisdiction over any dispute, and each Party irrevocably consents to personal jurisdiction and venue in those courts.
Option C (Other State): This Agreement is governed by the laws of the State of [governing law state], without regard to its conflict-of-laws rules. The state and federal courts located in [venue county and state] will have exclusive jurisdiction over any dispute, and each Party irrevocably consents to personal jurisdiction and venue in those courts.
18. ELECTRONIC SIGNATURES AND NOTICES
Note: Use either Option A, Option B, or Option C. Use Option A if New York law governs or either Party requires ESRA language. Use Option B if California law governs. Use Option C for all other states.
Option A (New York — ESRA): The Parties agree that this Agreement may be signed electronically and that electronic signatures have the same legal effect as handwritten signatures, consistent with New York's Electronic Signatures and Records Act (N.Y. State Technology Law Section 302(3)).
Option B (California): The Parties agree that this Agreement may be signed electronically and that electronic signatures have the same legal effect as handwritten signatures, consistent with applicable California law.
Option C (All Other States — E-SIGN): The Parties agree that this Agreement and related documents may be signed electronically and that electronic signatures have the same legal effect as handwritten signatures, consistent with the Electronic Signatures in Global and National Commerce Act, 15 U.S. Code Section 7001, and applicable state law.
18.1 Notices. Notices under this Agreement must be sent to the addresses in the Preamble (or any updated address provided in writing). Notices may be sent by email to: Contractor at [contractor notice email] and Subcontractor at [subcontractor notice email]. Notices sent by email are effective when sent if no bounce-back or delivery failure notification is received by the sender.
19. GENERAL PROVISIONS
19.1 Entire Agreement. This Agreement (including Exhibit A) is the entire agreement between the Parties regarding its subject matter and supersedes all prior understandings and agreements. Any amendment must be in writing and signed by both Parties.
19.2 Order of Precedence. If there is a conflict between this Agreement and Exhibit A, Exhibit A controls for commercial details (scope, fees, timeline). All other terms of this Agreement control.
19.3 Assignment. Neither Party may assign this Agreement without the other Party's prior written consent, except that Contractor may assign this Agreement as part of a merger, acquisition, or sale of substantially all of its assets, provided the assignee agrees in writing to be bound by this Agreement.
19.4 No Partnership or Agency. The Parties are independent businesses. Nothing in this Agreement creates a partnership, joint venture, employment, or agency relationship. Neither Party has authority to make commitments on the other's behalf.
19.5 Severability. If any provision of this Agreement is held unenforceable, the remaining provisions remain in full force and the unenforceable provision will be modified to the minimum extent necessary to make it enforceable.
19.6 Waiver. No failure or delay by a Party in exercising any right, power, or remedy will operate as a waiver of that right. A waiver of any breach is effective only if in writing and signed by the waiving Party.
19.7 Counterparts. This Agreement may be executed in counterparts (including by electronic signature), each of which is an original. Together they constitute one agreement.
19.8 Equitable Relief. Each Party acknowledges that a breach of Sections 6 (Confidentiality) or 7 (Intellectual Property) may cause irreparable harm for which money damages would be inadequate. Each Party is entitled to seek injunctive or other equitable relief for such breach without posting bond and without proving actual damages.
────────────────────────────────────────────────────────────────────────────────
Note: DISCLAIMER: This template is provided as a starting point for informational purposes only. It is a technology tool, not legal advice, and it does not create a lawyer-client relationship. Laws change frequently, vary by state and locality, and this template may not reflect all applicable requirements for your specific situation. For any significant engagement — especially where worker classification, IP ownership, data privacy, or restrictive covenants are at stake — you should review this agreement with a licensed attorney in the relevant jurisdiction before signing.
────────────────────────────────────────────────────────────────────────────────
SIGNATURES
IN WITNESS WHEREOF, the Parties have executed this Subcontractor Agreement as of the Effective Date.
CONTRACTOR
Signature: _________________________
Printed Name: _____________________
Title: ____________________________
Date: _____________________________
Address: __________________________
Email: ____________________________
SUBCONTRACTOR
Signature: _________________________
Printed Name: _____________________
Title: ____________________________
Date: _____________________________
Address: __________________________
Email: ____________________________
Note: For US tax purposes, each party should provide a completed IRS Form W-9 (US persons) or W-8 (non-US persons) before the first payment is made. Do not include SSNs or EINs in this agreement.
────────────────────────────────────────────────────────────────────────────────
EXHIBIT A — KEY COMMERCIAL TERMS
Note: Complete this Exhibit before execution. In case of conflict with the Standard Terms above, this Exhibit prevails for commercial details (scope, fees, and timeline only). All other terms in the Standard Terms control.
1. Effective Date: [effective date]
2. Contractor Legal Name: [contractor legal name]
3. Contractor Entity Type & State: [contractor entity type], [contractor state of formation]
4. Contractor Address: [contractor address]
5. Subcontractor Legal Name: [subcontractor legal name]
6. Subcontractor Entity Type & State (or 'individual'): [subcontractor entity type], [subcontractor state of formation or 'individual']
7. Subcontractor Address: [subcontractor address]
8. Client / Customer Name: [client / customer name]
SERVICES & DELIVERABLES
9. Services Description: [services description — describe the work in plain terms]
10. Deliverables: [list of deliverables and formats]
11. Timeline / Milestones: [dates and milestones]
12. Acceptance Period (days): [acceptance period, e.g., 10]
13. Acceptance Criteria (if any): [acceptance criteria and process — or 'as described in services description']
FEES & PAYMENT
14. Pricing Model: [hourly / fixed fee / milestone-based]
15. Rate or Fixed Fee: [rate (e.g., $x/hr) or fixed fee (e.g., $x)]
16. Milestone Amounts (if any): [milestone + amount, e.g., 'delivery of draft: $x']
17. Invoicing Schedule: [e.g., monthly / upon milestone completion / other]
18. Payment Terms (days after invoice): [payment terms, e.g., 30]
19. Late Interest Rate: [late interest rate, e.g., 1.5% per month]
20. Invoice Dispute Window (days): [dispute window, e.g., 10]
21. Expenses Policy (if any): [e.g., pre-approved travel only; $x threshold; or 'no expenses reimbursable']
TERM & TERMINATION
22. End Date or Completion Trigger: [end date or 'completion of the services']
23. Termination for Convenience Notice Period (days): [notice period, e.g., 14]
24. Cure Period for Cause Termination (days): [cure period, e.g., 10]
CONTRACTOR STATUS & IP
25. Primary State of Service Performance: [primary state where services performed — drives section 4 option]
26. Independent Contractor Clause Option: [section 4: option a (ca) / option b (ma or nj) / option c (all others)]
27. IP Ownership Clause Option: [section 7: option a (ca) / option b (ny or de) / option c (all others)]
28. Key Person (if Section 5.3 applies): [key person name — or 'n/a']
CONFIDENTIALITY & DATA
29. Confidentiality Survival Period: [confidentiality survival period, e.g., 3 years]
30. Data Security / Privacy Clause Option (Section 8): [option a (ca) / option b (ny) / option c (all others) — or 'section 8 deleted']
31. Security Incident Notification Period: [incident notification period, e.g., 48 hours — or 'n/a if section 8 deleted']
RESTRICTIONS & LIABILITY
32. Non-Solicit / Non-Compete Restriction Period (months): [non-solicit restriction period, e.g., 12 — or 'section 9 deleted']
33. Non-Compete Clause Option (Section 9.3): [option a (ca) / option b (tx) / option c (all others) — or 'section 9 deleted']
34. Non-Compete Restriction Period (months): [non-compete restriction period — or 'n/a']
35. Non-Compete Restricted Services: [restricted services description — or 'n/a']
36. Non-Compete Geographic Scope: [geographic scope — or 'n/a']
37. Non-Compete Named Competitors / Category: [named competitors or competitive category — or 'n/a']
38. Liability Cap Period (months): [liability cap period, e.g., 12]
39. Liability Clause Option (Section 12): [option a (ma/nj) / option b (ca/ny/de) / option c (all others)]
INSURANCE, FORCE MAJEURE & GOVERNING LAW
40. Insurance Required (Section 13): [e.g., general liability $1m/occ, e&o $1m/occ — or 'section 13 deleted']
41. Insurance Tail Period (years): [insurance tail period, e.g., 1 year — or 'n/a']
42. Force Majeure Threshold (days): [force majeure threshold, e.g., 30]
43. Governing Law Option (Section 17): [option a (ny) / option b (de) / option c (other)]
44. Governing Law State (if Option C): [governing law state — or 'n/a']
45. Venue County and State: [venue county and state]
46. eSign Clause Option (Section 18): [option a (ny) / option b (ca) / option c (all others)]
47. Contractor Notice Email: [contractor notice email]
48. Subcontractor Notice Email: [subcontractor notice email]
ADDITIONAL TERMS
49. Work Location: [remote / onsite at [address] / hybrid]
50. Client Contact Name & Email: [client / customer contact name and email]
51. Contractor Contact Name & Email: [contractor contact name and email]
52. Subcontractor Contact Name & Email: [subcontractor contact name and email]
53. Other Special Terms: [any other agreed special terms — or 'none']
────────────────────────────────────────────────────────────────────────────────
END OF AGREEMENT
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