Review Governing Documents Before Entering Into a Contract
Ekmark Law | 08-29-2013
Whenever an association is renewing or entering into a new contract, there are many issues to consider. With so much focus on finding the right company at a good price, it is easy to overlook the requirements that may exist in the declaration and bylaws.
Some governing documents require that certain contracts be approved by the members or by a specific percentage of the board (such as 2/3 or 75%). Other times, documents place limits on the length of term for a contract. For example, an association’s bylaws may limit contracts to no more than one-year terms. Such a requirement could impact many possible contracts, such as landscape contracts, management contracts, or security contracts.
Governing documents may also require that contracts contain specific terms allowing for termination of the contract. For example, the governing documents may require that the contract contain a provision stating that the contract can be terminated with 30 days’ notice.
Finally, some governing documents contain specific requirements on who must sign the contract (such as the President and the Secretary).
Associations should be mindful of these types of requirements and limitations in their governing documents so that, once the association finally finds the right company at the right price, the contract does not get challenged or invalidated over a technicality.