Condo Media - August 2021 - 20

What to Know About Vendor Contracts
The COI serves another useful purpose
in that it identifies all applicable
insurance policies and coverage
amounts, including workers' compensation.
The COI is one tool to use to
verify the vendor's insurance coverage.
The second objective for community
associations when hiring a
vendor is to require that the insurer
notify the association of cancellation
of the policy for nonpayment, nonrenewal,
and/or expiration, which
can be accomplished through a written
notice of cancellation endorsement.
Without notification from
the vendor, the association may be
completely unaware that the vendor
is performing work on the property
with lapsed insurance coverage.
l Warranties
An association should make sure to
include the warranties the vendor
will provide in a vendor contract.
Examples of specific warranties include:
the services will be provided in
accordance with industry standards,
and/or the vendor has the necessary
knowledge and expertise to perform
the services; the vendor has the
capacity to enter into the agreement;
and the products or services being
provided will conform with any
specified requirements.
l Proper Licensure
A vendor license is a type of basic
business license that a person or
company needs to obtain before they
can sell their goods or services in a
certain jurisdiction. A vendor license
may be a basic business license, a tax
registration, or a vendor/contractor
license for a government agency. If applicable,
the association should verify
that the vendor being hired is properly
licensed to perform the services for
which it has been retained.
l Indemnification
Indemnity clauses are common in all
contracts and can often go overlooked
by the contracting parties. An indemnity
clause is a contractual transfer
20 CONDOMEDIA August 2021
Ensuring that your association's contract with a vendor contains
a favorable termination provision will protect the association
from the headache, time, and money that could result from the
vendor failing to fulfill its duties under the contract.
of risk between contracting parties,
generally to prevent loss or compensate
for a loss that may occur because
of a specified event. An example of a
standard indemnity clause in a vendor
contract is as follows: " Vendor agrees
to indemnify and hold the association
harmless against all liability claims
or demands for injuries or damages
including but not limited to attorney's
fees to any person or property arising
out of the performance of the contract
by vendor. " When contracting with a
vendor, an association should include
an indemnity provision whereby the
vendor indemnifies the association
against any injuries or damages
caused by the vendor from its performance
of the contract.
l Rules for Vendor
An association should set certain
rules for the vendor that control
the manner in which the vendor
may perform its duties under the
contract. For example, an association
should set rules that govern the activities
of a vendor in common areas,
identifies the time of day the vendor
can be on site, where the vendor may
park while on the job, etc.
l Termination Provision
A well-written termination provision
is essential in a vendor contract.
Although a business relationship may
start out well between the community
association and a vendor, there is
always a chance that issues will arise
and the association will desire to end
the contractual relationship.
A termination provision in a
contract outlines the methods and
terms by which a party can terminate
a contract. The most helpful provision
for an association is a clause
that allows it the ability to terminate,
with or without cause, upon providing
a certain number of days' notice
(at least 30 days is recommended).
Under this provision, the association
would send written notice to the
vendor using the method specified in
the contract. When the notice period
lapses, the contract automatically
terminates, and the association is
free to contract with other vendors.
The 30 days' notice termination
provision above is not as practical for
one-time projects such as a minor
repair to some part of the condominium.
For these one-time projects, the
association should propose a termination
provision that ensures that, upon
determination by the association
that the vendor has failed to perform
properly under the contract, the association
may withhold payment until
the vendor has cured the issue.
Ensuring that your association's
contract with a vendor contains a
favorable termination provision
will protect the association from
the headache, time, and money that
could result from the vendor failing
to fulfill its duties under the contract.
In conclusion, hiring vendors is a
normal task that many community
associations may not worry about, but
these business relationships could lead
to big problems if things go wrong.
All associations should consider the
provisions above during the vendor
contracting process to help avoid potential
issues in the future.
n BRENDAN DALTON, ESQ., IS AN
ASSOCIATE WITH THE LAW FIRM
MORIARTY TROYER & MALLOY LLC.
Condo Media - August 2021

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