Association Contracts
When an association enters into a contract with a vendor, such as a painter or landscaper, both parties expect everything to work smoothly. Normally, an association does not consider the potential problems that could arise in the future. Further more, typically the vendor simply presents the association with a contract prepared by the vendor. Of course, a vendor will draft a contract that is favorable to the vendor. Thus, it makes good business sense for the association to carefully analyze contracts prepared by vendors.
There are a number of questions an association must consider every time it enters into a contract. For example, does the contract limit the vendor’s liability? Does the contract require the vendor to have insurance? Does the contract clearly state the scope of work? Does the contract contain a liquidated damages provision? Does the contract provide the manner in which disputes will be resolved? Is the contract drafted to heavily favor the vendor? Does the contract adequately protect the association?
Every contract is unique. The provisions of each contract depend on the circumstances. Although there are certain provisions that should be included in almost all contracts, there is no standard form contract that can be used for all situations. We strongly advise that associations retain an attorney to review every contract the association enters. In addition to protecting the association, Board members will protect themselves by relying on the advice of an attorney. The safe harbor rule provides that where a Board member relies on the advice of an expert, the Board member is not subject to personal liability. However, if your association chooses to negotiate contracts on its own behalf, take time to carefully read the contracts, ask questions, and request changes to contracts that will favor the association.
Finally, it is important to know that your association may have the right to cancel certain contracts that were entered into while the developer was in control.