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Ask a consultant

  • January 6, 2008 - 9:43 PM

Q I am new in the business field and would like information concerning subcontracting. What information do I need to create a contract with the individuals or companies with whom I'd subcontract?

MARY SOBOTA

ANOTHER SUN NURSERY

A Subcontracting or teaming with another contractor can be a growth opportunity for your business, as well as a profitable experience. However, special care must be given to the relationship. Every situation is different and there is no substitute for good legal advice, so you should first consult an attorney to prevent running into legal problems.

There are some areas in which issues may arise, such as method of compensation, quality-control measures and the specific expertise you expect the subcontractor to bring to your project.

You should also work with an attorney to determine whether to use a contractual indemnification clause.

Some courts have recognized that parties to a services contract can agree on who will bear the risk of loss. Similarly, each state imposes its own licensing laws and regulations on subcontractors to help protect the public from substandard work caused by unlicensed and incompetent contractors.

Over the past few years, several laws regarding subcontracting with the federal government have been passed and are now incorporated into the Small Business Act (Public Law 85-536, as amended). Consult a professional to determine whether you'll need a specific license before subcontracting.

Finally, you can get information from the U.S. Small Business Administration at www.sba.gov and the Minnesota Small Business Development Center at www.mnsbdc.com.

JOHN T. WENDT, J.D., M.A.

ASSISTANT PROFESSOR

ETHICS AND BUSINESS LAW

UNIVERSITY OF ST. THOMAS

OPUS COLLEGE OF BUSINESS

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