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MCL Jan/Feb 2014 - From the President
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From the President

By Michael Klemm, CAI-MN President

Michael Klemm

Contracts

In July 2014, the Minnesota Twins will host the Major League Baseball All-Star Game. We picture Target Field, the players and the fans, but behind the scenes, professional baseball is built on a framework of contracts for goods and services. For example, the MLB website displays the 2012-2016 Basic Agreement between the Major League Clubs and the Major League Baseball Players Association regarding scheduling, salaries, expenses, revenue sharing, spring training, post-season, safety, grievances, discipline, assignment of player contracts and termination.

Similarly, when we consider common interest communities, we think of tidy homes and manicured lawns, but the maintenance and operation of common interest communities depends on contracts. This article highlights some common issues in contracts for goods or services.

Parties

The parties to the contract should be identified by legal name, home state and type of entity (for example, The Acme Corporation, a Minnesota corporation). Most businesses that operate in Minnesota are required to register with the Minnesota Secretary of State, and information about them is available on the Minnesota Secretary of State website at http://mblsportal.sos.state.mn.us.

Term

The dates that the contract will start and end should be listed in the contract.

Purpose

The contract should include a detailed description of the goods or services to be provided, to ensure that the parties have the same thing in mind, and to provide a basis for enforcement of the agreement.
Time for Performance

The contract should describe the time for delivery of the goods or services. The association may wish to specify that "time is of the essence.” The vendor may wish to include a "force majeure” provision that excuses delay caused by circumstances outside its control.

Price

The contract should state the price for the goods or services. The contract should identify any equipment or materials that the association must provide, and any expenses that will be passed on to the association.

Billing and Payment Terms

The contract should establish a process for billing and payment. The association may wish to require detailed invoices. Any late payment fees or interest charges must be described in the contract.

Insurance and Indemnification

The contract should specify the types and amounts of insurance that are required. Many contracts include indemnification provisions regarding personal injury or property damage caused by negligence.

Warranties

Many contracts provide warranties for goods or services. Minnesota Statutes may establish warranties even if they are not mentioned in the contract.

Remedies

The contract should describe the remedies of each party if the other party fails to perform its obligations (known as a "breach” or "default”). Many contracts require written notice of a breach and an opportunity to cure (correct) the breach within a specified period of time before remedies can be imposed. Remedies might include the right to withhold payment, the right to withhold goods or services, the right to sue for specific performance (to require the other party to perform its obligations), the right to sue for damages (monetary compensation), or the right to terminate the contract.

Remedies might include "liquidated damages,” a specific amount that a party agrees to pay if they breach the contract, based on an estimate of the actual damages that would result from a breach. A contract also may provide that a party that breaches the contract will be responsible for the other party’s attorneys’ fees and costs of enforcement.

Notice

The contract should state the address for notice to each party, the method for giving notice (such as by personal delivery, mail, express courier or fax) and the time when notice is effective (such as three days after deposit in the mail).

Amendment

Most contracts provide that they can be amended only by a written document signed by both parties.

Assignment

The general rule is that contracts are freely assignable (transferable). One or both parties may wish to provide that the other party cannot assign the contract without their prior written consent.

Termination

Many contracts give either party the right to terminate if the other party breaches the contract and fails to cure the default within the specified time. Some contracts also allow a party to terminate for convenience. Termination clauses generally state how many days’ notice is required prior to termination, and what rights and obligations the parties will have if the contract is terminated.

The information in this article is general information and is not legal advice regarding action to be taken in any matter, which may vary depending on the circumstances. Associations, management companies and vendors should consult with their attorneys regarding contracts for particular transactions.

Published by Community Associations Institute — Minnesota Chapter, copyright 2013. All articles and paid advertising represent the opinions of authors and advertisers and not necessarily the opinion of either Minnesota Community Living or CAI–Minnesota Chapter. The information contained within should not be construed as a recommendation for any course of action regarding financial, legal, accounting, or other professional services by the CAI–Minnesota Chapter, or by Minnesota Community Living or its authors. Articles, letters to the editor, and advertising may be sent to Chapter Staff Editor Joanne Penn at joannep@cai-mn.com, or at CAI–Minnesota Chapter, 1000 Westgate Dr., Suite 252, St. Paul, MN 55114.

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