Subcontracting Agreement template

Subcontracting Agreement Template Compliant with the Laws of the Kingdom of Saudi Arabia

With the help and guidance of God, on this day __________, corresponding to / / AH, in the city of __________, it was agreed between: First Party (Main Contractor): Establishment/Company __________, Commercial Registration No. (__________), National Address: __________, represented by Mr __________, Mobile (__________). Second Party (Subcontractor): Establishment/Company __________, Commercial Registration No. (__________), National Address: __________, represented by Mr __________, Mobile (__________). Preamble: Whereas the First Party has contracted with the employer, __________, under the main contract dated / / AH to execute the __________ project located at __________ (the "Main Contract"), and wishes to assign part of the works to the Second Party; and whereas the Second Party is qualified and licensed to carry them out; the two parties, having full legal capacity, have agreed as follows: Clause One: Preamble and Documents The preamble, plans, bills of quantities, specifications and minutes form an integral part of this contract. The Second Party acknowledges that it has reviewed the provisions of the Main Contract relating to its scope of work and undertakes to comply with them within the limits of what has been assigned to it. Clause Two: Employer's Consent The First Party declares that subcontracting is (permitted under the Main Contract / approved in writing on / / AH) — to be specified, with supporting evidence attached. The First Party alone shall bear the consequences of this declaration being untrue. Clause Three: Scope of Assigned Works The Second Party undertakes to carry out the following works and no others: ................................................ Not included in its scope: ................................................ (State the exclusions expressly; most disputes in subcontracts arise from the boundaries of the scope.) Clause Four: Contract Value

• Total value: (__________) Saudi riyals, (inclusive / exclusive) of value added tax. The Second Party undertakes to issue a compliant tax invoice where it is registered with the Zakat, Tax and Customs Authority (ZATCA).
• Pricing basis: (lump sum / unit rate according to the attached bill of quantities).

Clause Five: Payment Entitlement (choose one of the two options and strike out the other)

• Option One — independent entitlement: The Second Party's dues shall be paid within (____) days of approval of its payment certificate, regardless of whether the First Party has been paid by the employer.
• Option Two — linked to receipt (pay-when-paid): Dues shall be paid within (____) days of the First Party receiving the value of the works from the employer, provided that the payment period shall in no case exceed (____) days from approval of the payment certificate. (This option shifts the risk of the employer defaulting onto the subcontractor; if adopted, it is preferable to cap it with a maximum time limit as above.)
• A retention of (____%) shall be withheld from each payment certificate, half of which shall be released on provisional acceptance and the remainder after expiry of the warranty period.
• Payment shall be made by bank transfer to IBAN: SA..............................

Clause Six: Term and Delay Penalty

• Execution period: (__________) days commencing from the date the site/work front is handed over to the Second Party.
• In the event of delay without an acceptable excuse, the First Party shall be entitled to a penalty of (__________) Saudi riyals per day, not exceeding (____%) of the value of this contract.
• No penalty shall be charged for delay caused by the First Party, the employer or variations ordered by them, and the period shall be extended accordingly.

Clause Seven: Obligations of the Second Party

• To execute the works in accordance with the specifications, good workmanship and the consultant's instructions.
• To provide trained labour and equipment, ensure the regularity of its workers' iqamas, and comply with labour and safety regulations.
• To comply with on-site safety requirements and bear responsibility for injuries or damage caused by it or its workers.
• Not to assign the works to another subcontractor without the First Party's written consent.
• To remove the debris from its works on an ongoing basis.

Clause Eight: Obligations of the First Party

• To hand over the site or a work front ready for work on the agreed date, and to give the Second Party access and storage.
• To provide the electricity and water needed for execution unless otherwise agreed.
• To approve and pay payment certificates in accordance with Clause Five.

Clause Nine: Relationship with the Employer This contract does not create any direct contractual relationship between the Second Party and the employer; the Second Party may not claim directly against the employer, and its claims shall lie against the First Party alone. Clause Ten: Warranty The Second Party warrants its works for (__________) months from provisional acceptance, and for no less than the warranty period imposed on the First Party under the Main Contract for the same works, and shall repair at its own expense any defects arising from its poor workmanship or poor-quality materials, without prejudice to the warranty provisions of the Civil Transactions Law. Clause Eleven: Termination The First Party may terminate the contract if the Second Party is in breach or stops work for more than (____) days without excuse, after written notice and a cure period. Dues shall be settled on the basis of the actual completion percentage. If the Main Contract is terminated for a reason not attributable to the Second Party, the Second Party shall be entitled to the value of the work it has actually performed. Clause Twelve: General Provisions

• This contract is governed by the laws of the Kingdom of Saudi Arabia, in particular the Civil Transactions Law as regards the contracting (muqawala) contract.
• Disputes shall be settled amicably, failing which they shall go before the competent judicial authority.
• The National Address recorded above is adopted as the chosen domicile for notices.
• Executed in two copies, one held by each party.

Signatures: Main Contractor: Name: __________ Signature: __________ Date: / / AH Subcontractor: Name: __________ Signature: __________ Date: / / AH

Related Templates

• Construction Contract Template — for the main contract between the employer and the contractor.
• Finishing Works Contract Template — for finishing works with or without materials.
• Two-Party Agreement Template — for a simplified agreement on a specific piece of work.