Long contract issue

Started by MikeK22 • 9 replies • 632 views

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MikeK22 (California)
Posts: 19

Posted:

Hello all,

My board (and I) entered into a 5 year contract 2-3 years ago without knowing that our bylaws explicitly state that we could not enter into a contract with a duration of more than 2 years. We got a new management company and noticed that the terms of the contract were really bad and that we were getting over charged. The manager attempted to deal with the vendor with no luck.

Any idea what options we might have?

RichardP13 (California)
Posts: 3,868

Posted:

Your only option, as I see it is to contact an attorney. They may be able to get you out of it, but it is the Board's responsibility, not the vendor's, to know what the governing documents states as it relates to contracts in this case.

You could have the governing documents amended to eliminate that language.

LetA (Nevada)
Posts: 2,679

Posted:

I hope your D&O insurance is paid up.

FredS7 (Arizona)
Posts: 927

Posted:

The vendor entered into the contract in good faith and the contract was executed by your board at the time.

The association is bound by the contract. The vendor may allow cancellation if you pay a penalty.

GileaH2 (California)
Posts: 38

Posted:

I am curious what you mean by "getting over charged"?

BenA2 (Texas)
Posts: 1,273

Posted:

I agree with Richard that you should consult an attorney. If the board did not have the authority to sign a five-year contract, it may not be a legal contract and I don't believe their can be a breach of contract if the contract is not legal.

KerryL1 (California)
Posts: 14,550

Posted:

Interesting point, Ben.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By BenA2 on 08/22/2018 5:02 PM
I agree with Richard that you should consult an attorney. If the board did not have the authority to sign a five-year contract, it may not be a legal contract and I don't believe their can be a breach of contract if the contract is not legal.

I don't think pleading ignorance will stand up in a court of law.

PaaN
Posts: 219

Posted:

Quote:

There may not be a legal/enforceable contract with the corporation

BUT

there may be a legal/enforceable contract with the actual signers.

The signers 'may' have caused damages to the vendor should the contract need 'cancelling'.

AugustinD
Posts: 5,144

Posted:

At a former HOA of mine, the Board signed a contract with a landscaper who lacked workers' compensation insurance. A member pointed out that the covenants require such vendors to have workers' compensation insurance. The HOA attorney said the HOA could not get out of the contract without significant penalty. Fortunately the contract was short term, and no worker was hurt on the job.

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