“A verbal contract isn’t worth the paper it’s written on.”  So states Samuel Goldwyn, in Goldwyn’s Law of Contracts.  What he didn’t say is that even a written contract, without key provisions, could be every bit as worthless as a verbal one.  The following are some key provisions that every contract should have:

  1. Parties’ Names. Make sure the formal legal names of the association and the contractor are used and the title of the person signing on behalf of each party is included in the signature block.  The legal name of the association is the name registered with the Colorado Secretary of State.
  2. 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.  Also, the contract should include a description of work that will not be done for the contract price (the “extra work”).
  3. Terms. The contract should contain the start and finish dates for the work, the schedule for completion, the contract sum, and any payment terms. In addition, the association should make sure it can withhold payment or setoff payments owed if the work is defective or a lien has been filed until the situation is corrected.
  4. Warranties. There should always be a warranty for work and materials used by the contractor.  The length of the warranty will depend upon the particular industry, but a one year warranty for work and materials is the most common.  In addition, any manufacturers’ warranties should be signed over to the association upon completion of the project.
  5. Insurance.  Contractor should always have insurance and the contract should specify the types of insurance and amounts required.  A construction contract will usually require builders all-risk coverage, commercial general liability insurance, automobile insurance, contractual liability coverage for indemnity obligations, workers’ compensation, and employer’s liability.  The association should consult with its attorney or insurance advisor to determine what types and amounts of insurance are needed for a particular project.
  6. Indemnification. There should always 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.  Most standard contracts only provide the association indemnify the contractor and the association should pay particular attention to these clauses to ensure reciprocal indemnification.
  7. 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 the attorney fees expended in pursuing a breach of contract are equal to or greater than its damages.
  8. Termination. Termination provisions should be fair to both parties and allow either party to terminate with or without cause upon reasonable notice.  Since a default by the association normally takes the form of nonpayment, the association should include a right to cure the default before a contractor or vendor can terminate the contract.  There is often a provision allowing for termination upon a certain number of days notice, although contracts with a quick completion date often do not have this provision. Termination provision.
  9. Notice.  Should notice need to be given, the notice provision should state to whom notice should be given (e.g., manager, attorney), where (e.g., management company address), how (e.g., by first class mail, fax, personal delivery), and when (e.g., notice deemed received 2 days after deposit in mail).
  10. Venue.  In the event of a lawsuit, venue should be in the county where the community is located.


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