When all else fails, a subcontractor will claim that he is entitled to money based on the legal doctrine of quantum meruit (payment for the value provided). It does not matter that the subcontractor did not sign the subcontract. The subcontractor has at least an oral agreement to do work and be paid for the work. Legally, the subcontractor may be bound to the subcontract, but to establish that will require perhaps contentious litigation. The subcontractor will argue that you should not have allowed the subcontractor to proceed if you truly intended that the subcontractor be bound to a subcontract that he did not sign. Also, if the subcontractor did not comply with the pay application process, the subcontractor is not necessarily barred from payment, particularly where the subcontractor is claiming entitlement to payment based on quantum meruit. Simply put, you need to prepare for a claim from the subcontractor and hope for the best. To prepare, you need to document any and all deficiencies in the subcontractor's work, and the cost to correct/complete the work. At the very least, you can back charge the subcontractor for the costs that you have incurred. The back charge might exceed the amount of the subcontractor's claim, and the subcontractor may back off. The documentation should include photographs (preferably digital with a date on the image), correction/completion documents (replacement subcontracts, payments, etc.), and default termination notices. You should comply with the default termination procedure under the proposed subcontract. If you plan to hold the subcontractor to the proposed subcontract, then you need to comply with the subcontract yourself.