May 10, 2010

Contracts - Review Them, Revise Them, and (Sometimes) Reject Them

Many community associations periodically execute contracts with vendors to obtain essential services. If you are on the board of a condominium or homeowners association, you should resist the temptation to sign contracts without thoroughly reviewing them. Important legal rights are at stake.

The board needs to make sure that the contract accurately describes the agreement. It should be clear how the price will be calculated and what variables will affect it. The contract should specifically describe what goods or services the association is buying and all applicable performance standards.

The contract should also protect the association if something goes wrong during performance. Requiring the vendor to carry insurance that covers the association is one way to do this. Obtaining a release from liability for claims arising out of the work is another. Dispute resolution procedures should be established, and the causes that allow a party to terminate the contract should be described in detail.

Proper review and editing of proposed contracts can help associations get the best value for their money and avoid costly disputes with vendors. The board should attempt to envision how the contract will be performed under a variety of circumstances and the problems that could be encountered along the way. If the board has trouble identifying areas of concern, experienced attorneys and property managers can facilitate this process.