California Construction Subcontractor Agreement (2026)

How to use this Construction Subcontractor Agreement in California

A subcontract is where the money and the risk of a construction project actually get divided. The prime contract sets what the owner owes the general contractor; this document sets what the general contractor owes the trade that does the work — and it is the document a court reads first when a crew walks off, a wall fails or an invoice goes unpaid. This template writes the scope, the schedule, the subcontract sum, the payment terms, the retainage, the insurance, the indemnity, the safety obligations and the flow-down of the prime contract into one agreement, with the rules of California applied to the clauses your state actually regulates.

Payment is the part California has an opinion about. The contractor must pay the subcontractor within 7 days after receipt of each progress payment. Late payment carries a penalty of 2% of the amount due per month, in place of interest. (Cal. Bus. & Prof. Code § 7108.5) No statutory retainage cap was confirmed here, so retainage is a negotiation — hold no more than the owner holds from you, and release it when the work is accepted, not when the whole project closes. On contingent payment, a pay-if-paid clause is unenforceable here (Wm. R. Clarke Corp. v. Safeco Ins. Co., 15 Cal. 4th 882 (1997); Cal. Civ. Code § 8122). Where a pay-if-paid clause would be struck, this template uses pay-when-paid with a reasonable-time cap instead: the owner's payment fixes when the subcontractor is paid, not whether, and the general contractor keeps the cash-flow protection without a clause that evaporates in court.

Risk moves through three clauses, and only one of them is really negotiable. Insurance moves the loss to a carrier: general liability, auto, and workers' compensation for the sub's own employees, with the general contractor and owner as additional insureds on a primary and non-contributory basis, and the certificate in hand before the crew arrives. That last one is not paperwork — in California, a worker performing work for which a contractor's licence is required, who holds no licence, is an employee of the hiring party, and any worker whose employer carries no coverage is presumed an employee. (Cal. Lab. Code §§ 2750.5, 3357) Indemnity picks up what insurance does not, and here the state sets the ceiling: An indemnity clause in a construction contract is void to the extent it makes the subcontractor answer for the indemnitee's own negligence, whether sole or partial; indemnity for the subcontractor's own share of fault is still allowed. (Cal. Civ. Code §§ 2782, 2782.05) This template writes Section 9 to that ceiling automatically, so the clause survives instead of being struck as a whole.

Three habits keep a subcontract out of court. Put every change in writing before the changed work starts, with its price and its effect on the date — verbal extras are the single most common construction claim. Exchange a lien waiver with every payment, conditional with the application and unconditional once the funds clear; the subcontractor's own notice and filing deadlines under Cal. Civ. Code §§ 8000–8848 (works of improvement) run from its last day of work, not from the general contractor's. And check the licence: California licenses contractors (Cal. Bus. & Prof. Code §§ 7030, 7159(d)(1)) and the general contractor's licence does not cover the sub — in a licensing state an unlicensed sub can lose the right to be paid at all.