Signing their contract: whose terms apply, and what you can still negotiate

When you sign a head contractor’s subcontract or a big customer’s supplier agreement, their document governs, and your own terms of trade usually fall away. What you can still shape is what goes into it before you sign. And some protections come from the law, whatever you sign.

For a lot of subcontractors and suppliers, this is where the pressure sits. The people who hold the contract set the terms: when you get paid, how variations are handled, what you can claim and when. Payment at 60 or 90 days is common. It can feel like a simple choice: fit in, or don’t get the job. There is more room than that, and it starts with knowing exactly where you stand.

Whose terms apply when you sign theirs?

When you come in as a subcontractor, or tender for a project, and sign their agreement, that becomes the primary document you all work to. Your terms of trade sent with the tender or the quote usually fall away, unless the signed agreement lists them. A line in a covering letter is unlikely to survive. If something matters to you, it has to be written into the document you sign.

There is no harm in asking them to sign your terms as well. A customer who will sign your terms, a general security agreement and a personal guarantee gives you something else to stand on. Most big customers won’t, and in a dispute their document is the one that counts.

Standard form contracts, and the special conditions

Many big projects run on standard form contracts. The best known is NZS 3910, the general conditions of contract for building and civil engineering, which Standards New Zealand says is used in nearly 80% of construction contracts in the country. NZS 3916 covers design and build, and NZS 3917 suits fixed-term maintenance and services such as cleaning, painting and repairs. They are written by committees of contractors, designers, clients and government, working by consensus. Industry bodies publish their own subcontract forms, and many head contractors and large companies use their own.

The standard form is the starting point. Each project then adds special conditions, and that is where the balance moves. Standards New Zealand itself has said that the special conditions added over the years often created an imbalance in risk. Read the special conditions first. That is where the job’s real terms live.

A purchase order is not protection

There is a common belief that once you are dealing with big corporates, councils or government departments, you are safe. A purchase order feels like certainty. It is a control mechanism for their spending. It does not guarantee timing, and it does not protect your margin. Purchase orders change, sites change, timelines change, and every change costs the supplier. Assuming a PO equals payment certainty gives you a false sense of security.

Ask us about a contract you’ve been sent

The law sits outside both contracts

Outside of any contract is the law, and some of it applies whatever you sign. On construction work, the Construction Contracts Act 2002 gives every subcontractor a floor:

• Pay when paid has no effect. A clause that makes your payment wait on the head contractor being paid cannot be enforced (section 13).
• Retentions are held on trust. Money held back from you belongs to you, in trust, and has to be kept in a proper account or covered by a bond. Its release cannot depend on anything other than your own performance, and it falls due once you have done everything your contract requires of you, to the standard agreed (sections 18C, 18D and 18I).
• The payment process cannot be signed away. Your right to make payment claims, to be told in a payment schedule what will be paid and why, to suspend work after notice, and to go to adjudication, stays in place whatever the contract says (section 12).

Outside construction, the protections are thinner. Since 16 August 2022, a one-sided term in a standard form contract between businesses can be declared unfair, but only where the relationship was worth under $250,000 a year when it began, and only the Commerce Commission can take it to court. Unconscionable conduct is unlawful between businesses of any size, with a high bar. On central government contracts, agencies must pay within 10 business days and must require their suppliers to pay subcontractors on terms no less favourable. No New Zealand law sets a maximum payment term between businesses.

Knowing the law is there doesn’t make enforcing it quick or easy, and most businesses never want to go there with a customer they value. What it does is tell you what you don’t need to negotiate for, so you can spend your bargaining on what the law leaves open.

Six special conditions, one concession

A business tenders for a project and asks for six special conditions: a security interest, a shorter payment cycle, the right insurances, and so on. It wins the work, and gets one of them. So which one matters most?

Start with timing. Tender conditions often bar changes once a tender is in, so anything you want has to go in with the first submission, listed clearly as a qualification. Keep the list short. A long list can see a tender set aside, and a short one gets read. Putting a price on an ask turns it into a choice for the customer: the price on 20th-of-the-month terms, and the price on 60-day terms.

Then spend your ask where the law leaves you open. On construction work you don’t need to negotiate for what the Act already gives you. The asks that move your cash flow most are usually the payment period, how often you can claim, a deposit or payment for materials, the retention cap and its release dates, interest on late payment, and a liability cap that matches your insurance. Security, such as a PPSR registration or a general security agreement, needs the customer to sign something, and a big customer is the least likely to. Ask, by all means. Just don’t let it be the only thing you asked for.

Check them the way they check you

Before you tender, decide whether to tender at all. Is the party issuing the contract sound? Are the terms acceptable? A big name is not the same as a safe customer. If you are being treated like a bank, funding labour and materials while you wait to be paid, it is only reasonable to do your due diligence: confirm the legal entity on the Companies Register, look at who the directors are, and run a credit check. Ownership changes partway through a relationship matter too.

See how we can help before you sign

When the job is big enough to be a gamble

On day-to-day jobs, most businesses have more control than they realise. On the biggest projects and with the biggest organisations, especially tendered work, a different power dynamic kicks in. A lot of it comes down to who needs who most. Long payment terms are often a deliberate strategy on the other side. That doesn’t make anyone a villain. It does mean one side can set the terms and the other side wears the cost.

We spoke with a subcontractor who tenders for most of his work. What he makes is custom, and once it is installed he can’t take it out and use it on another job. He knows that to some degree he is gambling. Most of the time it’s fine. But that one time it isn’t can be really painful.

So the decision is made when you sign. About 80% of what decides how quickly you get paid happens before you send an invoice or a claim: whether you take the job, who you take it from, and what you negotiated into the contract. Even when you cannot control the environment, you can still control how much risk your business carries inside it.

What you can put in place before you sign

• Read it, special conditions first. When are the cut-offs for payment claims? How are variations dealt with? What is your recourse if you are not paid? Often there isn’t any written in for you.
• Know your floor. On construction work, know what the Act already gives you, so you don’t spend your ask on it.
• Put your asks in the first submission, few and priced. Lead with the one that changes your cash flow most.
• Price the time you fund. If they want 60 or 90 days, the cost of carrying that belongs in your price.
• Reduce the exposure you can’t secure. Shorter claim periods, staged payments, payment for materials, a lower limit on how much you carry at any one time.
• Decide in advance when you walk away. Give yourself permission to say no to a job that won’t serve your business. A calm no changes the conversation.

And when the contract is signed and the agreed terms still get stretched, that is a different conversation: when a customer ignores the payment terms you agreed.

This page is education and commercial insight from our own research and experience, not legal advice. Do your own research, and get legal advice for your own situation.