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8 Keys To Contracts

When entering into an agreement of services with a contractor, it is best to have the association’s attorney draft a contract, or at the very least, review a contract you have drafted to ensure it has the appropriate details. Below are some very important provisions you should include in a contract. Again, consult your attorney for additional provisions that may be necessary for the type of contract you are entering into.

1. Term of Contract – All contracts need a start and end date. The contract should also state what happens if the project is not completed on time (i.e., monetary penalty). If this is not specifically stated, a contractor can potentially take too long and not have a much needed project completed in time. For example, if a roof needs replacement because it has leaks and the contractor does not complete the replacement within the agreed-upon time period, it could cause more damage. If the contract is of a recurring nature, such as a two-year landscaping contract, the start and end dates of the contract should be clearly stated.

2. Scope of Services / Work – A contract should clearly define the scope of work and, if necessary, incorporate the specifications and make them part of the contract. Scope of work should also include applicable codes and industry standards; require that the contractor and workers are clearly identifiable (such as wearing shirts with the company logo); and specify working hours, materials used, storage and location of where work is to be done. These terms are very important to guard against any type of miscommunication or disagreements once the project is underway. If the scope is not clearly defined, it could lead to delays and/or disagreements that can negatively impact the project and the community.

3. Termination Clause – A contract should clearly state what happens if either the contractor or the association fails to uphold their end of the contract. An example would be to allow the association or contractor to cancel the contract with thirty (30) days’ notice with or without cause. Until the time of termination, both parties will still be required to fulfill their obligations as set forth by the contract. This will allow either party to cancel a contract if the contract ceases to be beneficial to the contractor or the association and will allow for a contract to be terminated legally and equitably.

4. Parties to Contract / Subcontractors / Notice Provisions – The contract should name the association and the contractor, including whether subcontractors will be used. Addresses and phone numbers should be listed to provide notice if any changes occur to the contract or in the case of termination. 

5. Price and Payment Terms – The contract should specifically state the cost of the work and if progress payments are required. This is important to ensure the contractor does not add on unnecessary costs without association’s knowledge. A provision under “Price and Payment Terms” should include if any additional work or material is required, a signed addendum or written agreement is needed, and final payment will be held until an inspection of the work takes place and all work was satisfactorily completed. This provision should also state when invoices will be submitted and how much time the association must pay them (for instance, within thirty (30) days of the receipt of an invoice). In addition, final payment should also be accompanied by an executed waiver of liens (of any subcontractor or supplier).

6. Insurance Coverage – A contract should contain language outlining the insurance requirements and minimum amounts of coverage the contractor should maintain, including but not limited to liability, property damage, auto and workers comp. Certificates of insurance should be required to be provided by the contractor naming the Association as an additional insured. 

7. Warranty Information – Every contract should include the warranty information and provide copies of the warranties, both on materials and labor. If a new roof was installed and it leaks a year later, the association should be able to refer to the contract to determine who is responsible (the contractor, the manufacturer, etc.) and who should be contacted to have repairs made. If not specifically outlined in the contract, the association could be left with an expensive repair that should be someone else’s cost.

8. Indemnification and Hold Harmless Provision – A contract should state the contractor will indemnify and hold harmless the association for any amounts the association must pay because a claim was made against the association as a result of the potentially faulty or negligent work performed by the contractor, including attorneys’ fees and costs. For example, if a contractor was tearing out concrete one day and pouring new concrete the following day, the contractor should cone and tape off the excavated area to prevent any trip hazards. If the contractor does not do this and an owner injures themselves by tripping over this area and sues the association and the association is found liable, this provision will require the contractor to pay, including any legal costs.

About the Author

Tami Rutkowski, CMCA, AMS, PCAM is a Regional Manager with Associa Mid-Atlantic, AAMC and serves as a member of CAI Keystone’s Communications & Content Committee. She can be reached via email at: tami.rutkowski@associa.us