Homeowner associations are routinely provided a variety of forms of contracts to sign. Some vendors may submit a one-page bid, whereas others may submit 25-page contracts filled with legalese. Still other vendors may want the association to draft its own contract. Regardless of the form it takes, written contracts all have one thing in common: they are enforceable and can have serious consequences for an association that does not understand what it is signing.

Here are a few of the typical contract terms that an association should understand before entering a contract:

Scope of Work and Timing of Performance: This one seems basic, but it is one area that causes frequent disputes. Make sure the contract clearly sets forth your expectations about the work to be performed and the timing for the performance. This may require written specifications to be attached to the contract, and may require the assistance of an outside consultant to draft the scope of work. 

Price: If the contract price is not a set amount, how is it to be calculated? Is it based on the vendor’s actual time and material costs or is there some markup? Is there a guaranteed maximum cost or a not-to-exceed price or is there the possibility of additional charges being added after the work begins? This issue often leads to disputes when a contract lists a contract sum, but also allows for additional time and material billing.

Termination: Is the contract for one discrete project or is it a long-term maintenance contract? If it is a long-term contract, does it have an end date or does it automatically renew? Are there automatic price increases at renewal? Are there any penalties or charges for terminating the contract early?

Breach/Dispute Resolution: What are your options if one party is not living up to its end of the bargain? Can you stop work? Are there terms in the contract about the type of notice required to give the other party? Are there penalties or damages that can be assessed? Are there provisions for indemnity or limitations of liability that might affect your ability to recover damages? Lastly, is there a mandatory mediation or arbitration clause?

These are just a few examples of issues an association board or manager needs to understand before entering a contract, but there are many others. The bottom line is everyone needs to understand the complete contract terms before signing.