Associations enter into contracts on a regular basis for various items ranging from general landscaping to major projects such as roofing and fence replacement. Most of the time, these contracts are written on behalf of the contractors and are standard preprinted forms. These types of contracts leave little room for negotiation, are often missing key terms and provisions, provide little protection for the association, and contain provisions that may become problematic for associations.
Although it is always recommended that contracts in excess of $5,000 be reviewed by legal counsel, should an association take on contract negotiation on its own, it should consider the following tips:
- Verify the contract contains correct names of all parties. For example, the contract should specify the full legal name of the association (as stated in its articles of incorporation) and not the management company as the association is the entity entering into the contract.
• Do not sign a work order, proposal, offer, or quote without reviewing and understanding all terms therein. Once you sign it, it becomes binding even if the word “contract” or “agreement” is not utilized.
• Do not rely on verbal representations or explanations pertaining to the contract. All terms relating to the contract must be included within the “four corners of the document” meaning that they need to be in writing within the contract itself. Verbal representations will not be legally enforceable.
• Verify the contract, at a minimum, contains the following provisions:
- Start and completion dates.
- Scope and standards of work to be provided.
- Contract price and schedule for payment.
- Indemnification for negligence, willful, and wanton acts and damages by the contractor or its employees or subcontractors.
- Termination provisions.
- Attorney’s fees awarded to the prevailing party in the event of legal action.
- General liability, casualty and workers compensation insurance provided by the contractor.
- Venue in the event of a lawsuit—e., the county in which legal action must be commenced.
- Responsibility for obtaining the necessary permits and licenses, if any.
- Lien releases and waivers.
- Payment is not a release.
- How, when, and where notice must be provided.
- Contract is the complete and entire agreement between the parties.
- If the association only wants the contractor hired to perform the work in question, verify that assignment of the contract requires the prior written agreement of the association.
The above tips do not encompass all aspects of contracts that may be presented to associations, but they are some of the more important and problematic provisions.