By Elizabeth Lanham-Patrie, Esq. / Published October 2017
Many associations execute “contracts,” which are actually only proposals as to the work to be performed or services to be provided to the association. The proposals normally have the amount to be paid and the work to be done, but not much more. If a proposal is more thorough with terms and conditions, then the terms and conditions are usually strongly favorable to the contractor or service provider. In addition, many associations believe they do not need a contract reviewed or prepared by an attorney because the contractor has done a lot of work in the area or has worked for the association before, or the contractor is a really nice person and is cutting the association a deal. While those may be good reasons to select a contractor, they are not good reasons to do business with the contractor without a proper contract.
With regard to a contract, the first step, as set forth in number 5 below, is to consult with an expert regarding the work to be done and to review the specifications of the contract if the contract relates to construction, repair, or replacement. The association’s attorney will not be able to advise the association as to whether the specifications for the application of the paint or the installation of the paving are correct. Instead, the association’s attorney will focus on the legal aspects of the contract. Second, it is important to have an attorney review or prepare the contract so that the association is protected should there be a dispute between the association and the contractor or service provider.
A contract should, at a minimum, include the following information:
1. The correct names of each party, along with their addresses. (The association should verify that the entity identified on the contract is an active corporation. This can be determined by visiting the website for the Department of State, Division of Corporations, at dos.myflorida.com/sunbiz/);
2. The credentials of the contractor/service provider. Is the contractor/service provider properly licensed, and will they pull the right permits, if needed?
3. The start date and ending date of the contract;
4. The amount of the contract and the payment terms;
5. The work to be provided by the contractor/service provider. Specifically, it should be stated what the contractor/service provider is supposed to do for the association. If the contractor/service provider is doing construction, repair, or replacement of structures, roads, etc., we recommend that the association hire an expert to review the specifications of the work. In addition, depending on the type of contract, the association may also need an engineer or project manager to inspect the work as it is being performed by the contractor;
6. A provision as to how subcontractors are treated under the contract, and whether the association has the right to approve or object to subcontractors;
7. A provision as to how disputes between the parties will be resolved;
8. The procedure to terminate the contract. If the contract is for services, such as landscaping or other ongoing maintenance and services, it is very important to have a termination provision;
9. A warranty provided by contractor/service provider for the work/services performed and any materials used;
10. Insurance held by the contractor/service provider. The association should have its insurance agent verify that the type and amount of insurance carried by the contractor/service provider is sufficient;
11. There should be a provision for the contractor/service provider to indemnify and hold the association harmless for its negligent or intentional acts and omissions;
12. A provision that if there is a dispute, the prevailing party is entitled to attorney’s fees and costs;
13. A notice provision, which provides how one party is to contact the other party, and when notice has been deemed given; and
14. Standard contract terms and conditions, such as a provision that Florida law will apply, venue, how the agreement can be modified, etc., are often referred to by clients as “legalese,” but they are important if there is a dispute. An association does not want to have the laws of another state apply or travel to another county for a lawsuit because the contract states the venue will be in Pinellas County when the association is located in Orange County.
To conclude, while many associations feel they do not need a contract prepared by an attorney because they have been successful in the past with the work being properly completed in a timely manner in the community, the contract is important for those times when things do not go smoothly. A contract is needed for those times when the contractor does a poor job, or the contractor does not finish the work and takes off with the association’s money, or the contractor is not providing the services they said they would provide and the association is stuck in a three- year contract. For these reasons and many more, it is important to have the association’s attorney review any proposals/contracts received from a contractor/service provider and prepare a contract that is appropriate to protect your association.
Elizabeth A. Lanham-Patrie, Esq.
Senior Attorney with Becker & Poliakoff
This article was prepared by Elizabeth A. Lanham-Patrie, Esq., Senior Attorney with Becker & Poliakoff. The information contained herein should not be acted upon without professional legal advice. The opinions expressed herein are as of the date hereof, and this law firm undertakes no obligation to advise of subsequent changes in the law.