Subcontract review checklist: the clauses that cost subcontractors money
Review a subcontract against the prime contract it flows down from, clause by clause, before you sign. Seven terms decide whether the sub gets paid for the work: flow-down, indemnity, payment timing, no-damage-for-delay, termination for convenience, changes and dispute resolution. Ask for the prime contract first; you cannot price risk you have not read.
This guide is general information, not legal advice. Statutes and cases are cited as checked on 2026-10-21; have counsel confirm how they apply to your contract and state.
What should a subcontract review checklist cover?
Use the table on every subcontract. The "position" column is a starting point for negotiation, not a rule.
| # | Clause | What to look for | Position to take |
|---|---|---|---|
| 1 | Flow-down | Whole prime incorporated by reference, or only scope, schedule and quality? | Limit flow-down to your scope; get the prime before you sign. |
| 2 | Indemnity | Broad, intermediate or limited form? Does it cover the GC's or owner's own negligence? See indemnification clauses. | Limited form, to the extent of your negligence. In Texas, Insurance Code Chapter 151 voids most broader forms. |
| 3 | Payment timing | Pay-when-paid or pay-if-paid? See pay-when-paid vs pay-if-paid. | A fixed period after the GC is paid; lien and bond rights preserved. |
| 4 | No-damage-for-delay | Do you waive delay costs even when the GC or owner causes the delay? | Strike for GC-caused delay; pass-through of any owner recovery. See no-damage-for-delay. |
| 5 | Termination for convenience | Costs only, or overhead and profit on work performed? | Work performed with overhead and profit, plus demobilization. |
| 6 | Changes | Must you perform before price is agreed? Short notice windows? | Directed work paid at cost plus markup pending agreement; workable notice periods. |
| 7 | Disputes | Venue in the GC's home state? Fee shifting? | Mediation first, project-state venue. In Texas, out-of-state law or venue clauses are void (Bus. and Com. Code 272.001). |
What is a flow-down clause, and why is it the biggest risk?
A flow-down clause makes the sub take on, toward the GC, the obligations the GC owes the owner. AIA A201-2017 Section 5.3 requires the contractor to bind each sub to the contract documents "to the extent of the Work to be performed by the Subcontractor". GC forms often go further.
- Bounded: limited to your scope, schedule, quality and safety. Workable.
- Full incorporation: the whole prime by reference, including LDs, indemnity and warranty terms you have never read. Price it or refuse it.
- Silent: no flow-down clause, but the prime is cited in the scope definition. Courts split on whether that imports prime terms.
Which standard subcontract forms exist?
AIA A401-2017 pairs with A201. ConsensusDocs 750 pairs with ConsensusDocs 200 and is generally more balanced on payment and disputes. Most subs see a GC's own form, which is where the deviations live.
Which Texas laws protect subcontractors?
- Anti-indemnity: Insurance Code Chapter 151 voids indemnity for the indemnitee's own negligence on most commercial projects.
- Contingent payment: Business and Commerce Code Chapter 56 limits pay-if-paid and preserves lien rights.
- Venue and choice of law: Business and Commerce Code 272.001 keeps Texas projects under Texas law and courts.
Dora reads the subcontract with the prime where you have it, maps each flow-down obligation, classifies the indemnity and payment clauses, and cites every checklist item to its page.
Frequently asked questions
What is a flow-down clause?
A clause that makes the subcontractor assume, toward the GC, the obligations the GC owes the owner under the prime contract. A broad one can import LDs, indemnity and warranty terms the sub has not seen.
Should a sub ask for the prime contract?
Yes. If the subcontract incorporates the prime, ask for it before signing. If the GC will not share it, limit flow-down to scope, schedule, quality and safety.
Which subcontract form is most balanced?
ConsensusDocs 750 is generally seen as more balanced than AIA A401, especially on payment and disputes. Most GCs use their own forms, so compare any form against one of the two.
When should a sub walk away?
When several structural risks stack: no access to the prime, broad-form indemnity, an enforceable pay-if-paid clause and a no-damage-for-delay waiver that covers GC-caused delay. Each is survivable alone; together they can make the work uneconomic.