What Contracts Do You Need for Construction Arbitrage?

Every construction arbitrage job needs exactly two contracts: one between you and the client, and one between you and each subcontractor. Those two documents - the client contract and the subcontractor agreement - are the legal spine of the model. Everything else slots inside them. Get both signed before any work starts.

The two contracts at the core of construction arbitrage#

This is the core of the model: in construction arbitrage you win the job, contract it out, and keep the spread. That structure means you sit in the middle of two separate legal relationships at the same time.

Contract 1 - the client contract. This runs between your company and the client paying you. You are the main contractor; the client is contracting with you for delivery of the whole job. Everything the client cares about - scope, price, payment terms, timeline, what happens if something goes wrong - lives in this document.

Contract 2 - the subcontractor agreement. This runs between your company and each trade doing the work. The key principle: the terms you agree with each sub should mirror the terms you have agreed with the client above. If the client expects the job done in six weeks, the sub's agreement reflects six weeks. If you are held to a defects liability period, you hold the relevant sub to the same.

The two documents interlock. That chain - client to you, you to sub - is how you manage delivery and liability without doing the work yourself.

Standard contract forms by country#

You do not have to write contracts from scratch. Every major construction market has standard forms published by industry bodies and tested in the courts. Use them as your starting point.

United States. The American Institute of Architects (AIA) publishes the most widely-used standard forms. For a fixed-price job between an owner and a contractor, that is the AIA A101-2017 (Standard Form of Agreement Between Owner and Contractor). For the contractor-to-subcontractor relationship, the AIA A401-2017 (Standard Form of Agreement Between Contractor and Subcontractor) is the equivalent. Both incorporate by reference the AIA A201 General Conditions, so obligations flow consistently up and down the chain.

United Kingdom. The JCT (Joint Contracts Tribunal) publishes contracts used on around 70% of UK building projects. For smaller jobs - typically under £500,000 - the JCT Minor Works Building Contract (MW 2024) is the right starting point for the client-facing contract. The corresponding JCT Sub-Contract sits beneath it for each trade. If you are paying subcontractors in the UK, you also need to be registered for the Construction Industry Scheme (CIS) and making the correct deductions - verify each sub's registration status with HMRC before their first payment.

Canada. Most commercial construction work runs on CCDC 2-2020 (Canadian Construction Documents Committee Stipulated Price Contract) between owner and prime contractor. Subcontractor agreements typically follow CCA forms or internally modified versions. Pay-when-paid provisions are common and have been codified in some provincial legislation - check your province before agreeing payment terms with subs.

Australia. For commercial work, AS 4000-2025 (General Conditions of Contract, updated in 2025) is the standard. Residential work uses state-regulated forms - HIA and Master Builders Association forms vary by state. Subcontract forms from Standards Australia sit beneath AS 4000 at the commercial level. Always confirm whether a state-specific form is required for residential work in the state where the job is located.

For small residential jobs in any country, a clear written contract in plain language protects both parties - as long as it covers the essentials below.

What your client contract must contain#

Whether you adapt a standard form or draft a plain-language agreement for a smaller residential job, these terms are non-negotiable:

• Scope of works - exactly what is and is not included, in plain language. This is your first defence against scope creep eating your margin.
• Contract price - the fixed or estimated amount, with a clear statement that changes are priced separately as variations.
• Payment schedule - the deposit, the payment milestones, and what progress or event triggers each one. Tie payments to progress, not just to calendar dates.
• Timeline - start date, expected completion, and a sensible clause for factors outside your control.
• Variations clause - any change to scope, price, or programme requires written sign-off from both parties before work starts.
• Defects liability - what you stand behind and for how long. Standard periods typically run 6 to 12 months after practical completion.
• Dispute resolution - how disagreements are handled before they reach a court or tribunal.

What your subcontractor agreement must contain#

The sub agreement mirrors the client contract but adds provisions specific to the subcontractor relationship:

• Scope and standard - the specific works the trade is responsible for, to what specification and quality standard.
• Agreed price or day rate - and what is and is not included in it.
• Payment terms and retention - the payment timing plus the retention percentage you will hold. Retention is typically around 5% in the UK and 5-10% in the US and Australia. It is held until snagging is signed off and any defects period has passed. Retention is how you hold each sub accountable for finishing the job properly. (See the post on how cash flow works across the full job cycle for how to manage the timing.)
• Insurance requirement - the sub must provide a valid liability insurance certificate before starting. Their cover is not your responsibility; demanding proof of it is. Ask for a certificate naming your company as an additional insured where possible.
• Independent contractor status - confirm in writing that the sub is an independent contractor, not an employee. This matters for tax treatment and employment law in every country. Getting this wrong is expensive.
• Defects liability - the sub is responsible for putting right defects in their portion of the work at their own cost, during the agreed period.
• Variations process - the same rule as the client contract: written approval before any change starts.

Before you issue a subcontractor agreement, make sure you have already vetted the trade. The contract locks in the deal; vetting the sub before you offer them the work is what protects you from handing a contract to the wrong person.

The third document: variation orders#

Neither the client contract nor the subcontractor agreement is static. Jobs change. When they do, the change must be captured in a written variation order (called a change order in the US) before the extra work starts.

A variation order needs five things:

1. Project name and reference number
2. A clear description of what is changing and why
3. The additional cost or credit, including any overhead and margin
4. The revised timeline or completion date
5. Signatures from both parties

Track variation orders in a log. On a job where changes happen verbally, you will not remember the details when the final invoice is raised - and neither will the client. Every unsigned variation is money you will struggle to recover.

When you issue a variation on the client side, issue the corresponding variation to the sub doing that work at the same time. Keep the chain intact.

Do you need a solicitor or attorney?#

For small, simple residential jobs, a well-written template in plain language is a reasonable starting point - provided you fill in all the specifics fresh for every job.

For commercial work, larger contract values, or any project where the stakes are high, get a construction solicitor or attorney to review the documents before you sign. One hour of legal time costs a fraction of a disputed final payment or a defects claim on a large job.

The standard forms - JCT, AIA, CCDC, AS 4000 - are written by industry bodies and tested in the courts. They are worth using as your base. A lawyer who knows construction will tell you what to adapt for your jurisdiction and your situation.

The contracts are not admin overhead. They are the mechanism that lets you run the model - winning work, subbing it out, protecting your margin - without being on the tools. Get them right once and they protect every job you run. For the full picture on the legal and insurance side, see the guide on construction arbitrage contracts, insurance, and staying legal.

Last checked: 17 July 2026.