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Cautionary Tales: Signed Proposals Are Contracts, By Andrew F. Meinert, Esq.

Andrew F. Meinert, AssociateOne of the primary functions of community association boards is entering contracts for services to be provided to the association, whether it is for ordinary landscaping or significant repairs.  Boards are commonly presented with proposals or estimates by contractors about their services.  However, boards must be extremely careful in reviewing proposals and signing such documents, because once a board member or manager signs a contractor’s proposal, the proposal automatically becomes a binding contract.

As an example, one association entered a contract for deck repair work in excess of $40,000.00. More than six months later, the work was not completed.  Unfortunately, the signed proposal did not contain a requirement to complete the project within a specific time frame or by a specified date.  Boards should always ensure contracts contain a timeframe for the work to be completed so that a contractor does not wait nearly a year to start the work.

In another instance, a board signed a proposal for masonry work that explicitly disclaimed responsibility for damage to utility lines. The proposal also required the association to reimburse the contractor for any legal fees it incurred due to the project.  During the work, the contractor cut a cable line.  Not only is that association now responsible for the costs of repairing the line the contractor damaged, incurring costs of more than $10,000.00, but the association is also responsible for any legal fees the contractor incurs.

These examples serve as a reminder to always assume that signing a proposal will establish a binding contract, and to consider having legal counsel review the proposal for revisions and recommendations to avoid contract terms detrimental to the association.