Attention to detail is key when negotiating vendor contracts for community associations. A vendor proposal lacking specificity that is signed by a manager or board constitutes acceptance of the terms laid out by the contractor and creates a binding contract. In this event, associations are at risk when disputes and disappointed expectations sour the relationship between the board and the contractor. The good news is that with some careful, pre-negotiation planning and a checklist of key contract terms and the assistance of legal counsel, a manager and board may secure a contract that best protects the interests of the association. This way the risk of costly litigation will be significantly reduced and the association will be protected should a vendor stray from its obligations or an issue arise that was anticipated and planned for in the written contract. Important clauses to be aware of include, but are not limited to:
Scope of Work: The contract should always include a detailed description of the work to be performed so both parties know exactly what to expect.
Timing & Payment: The contract should contain the start and finish dates for the work, the schedule for completion, the contract sum, and any payment terms. The association should make sure it can withhold payment or setoff payments owed if the work is defective.
Warranties: There should always be a warranty for work and materials provided by the contractor. The length of the warranty will depend upon the particular industry. Also, any manufacturers' warranties should be signed over to the association upon completion of the project.
Insurance: The contractor should always have insurance and the contract should specify the types of insurance and amounts required. A construction contract will often require builder's all-risk coverage, commercial general liability insurance, automobile insurance, contractual liability coverage for indemnity obligations, workers' compensation, and employers' liability.
Indemnification: There should be an indemnification clause requiring the contractor or vendor to indemnify the association against claims of damage or injury resulting from the contractor's conduct.
Attorney Fees: In the event of a dispute, the contract should provide for an award of attorney fees to the prevailing party. If the association is not entitled to attorney fees under the contract, the association may find that the attorney fees expended in pursuing a breach of contract are equal to or greater than its damages.
A checklist of key vendor contract terms will assist boards in negotiating better contracts. Legal review of vendor contracts is prudent to assure that the agreement is complete and to customize the agreement to the association's advantage based on the particular materials and services being provided.
Scope of Work: The contract should always include a detailed description of the work to be performed so both parties know exactly what to expect.
Timing & Payment: The contract should contain the start and finish dates for the work, the schedule for completion, the contract sum, and any payment terms. The association should make sure it can withhold payment or setoff payments owed if the work is defective.
Warranties: There should always be a warranty for work and materials provided by the contractor. The length of the warranty will depend upon the particular industry. Also, any manufacturers' warranties should be signed over to the association upon completion of the project.
Insurance: The contractor should always have insurance and the contract should specify the types of insurance and amounts required. A construction contract will often require builder's all-risk coverage, commercial general liability insurance, automobile insurance, contractual liability coverage for indemnity obligations, workers' compensation, and employers' liability.
Indemnification: There should be an indemnification clause requiring the contractor or vendor to indemnify the association against claims of damage or injury resulting from the contractor's conduct.
Attorney Fees: In the event of a dispute, the contract should provide for an award of attorney fees to the prevailing party. If the association is not entitled to attorney fees under the contract, the association may find that the attorney fees expended in pursuing a breach of contract are equal to or greater than its damages.
A checklist of key vendor contract terms will assist boards in negotiating better contracts. Legal review of vendor contracts is prudent to assure that the agreement is complete and to customize the agreement to the association's advantage based on the particular materials and services being provided.