This year there seemed to be more vendors involved in our life than ever before. Gone are the days when James would just show up with his machete to trim the palms or Oscar came by every Thursday to wash the cars for cash. Even Susan-the-dog-walker has incorporated. This year everyone had a contract. I guess it’s a sign of the changing (economic) times in Miami and a reflection of so many new faces in town. It seemed a good time to discuss vendor contracts and expectations.
As a general rule of thumb, I love contracts. I like knowing what I’m obligated to and what the vendor is obligated to in very clear terms. I’m spending someone else’s money on someone else’s property, so I want to make the right decisions and I want to be covered. I have been known to pass on simple work-for-hire contracts and counter with detailed expectations down to the required length of the grass cuts. (Yes, that was extreme, but it was better than having my boss freak out when the grass was too short.)
Some of them are just what they are, with no wiggle room, like agreements to have water delivered or phone contracts. Each still needs to be carefully read and understood.
Where to start?
It may seem obvious, but look for the name of the person or entity with whom you are entering into a contract. Is it Bob, or Bob’s Landscape? Who is really taking responsibility and can that party be held accountable and liable? Ask for copies of their business documents and insurance coverage if you are in doubt. Then move on to key contract points.
Determine the scope of the contract
It should be very clear what the party is being hired for, for how long, and at what cost. In the water contract, it’s may be as simple as 5 three-gallon bubbler jars every Tuesday 4 times a month for $150. For a landscaper, you’ll want to know a lot more. What areas will be maintained? With what equipment and what methods? What time will the come? Who will supervise the quality of work? At what cost will they supply extras like fertilizers, mulch, or soil. Will they be planting things, and is there a warranty on the plantings? Don’t be afraid to add an addendum and have it signed. You are providing the vendor with a specific scope of work and expectation for performance. This will make your life a lot easier when work starts.
Whereas the scope of work may read as more of a narrative, the Terms should be concise and actionable. Go over each carefully, seeking help from a legal assistant in areas that are unclear. Generally, one will find the following:
(1) Approval and Payment –What amount is authorized and when / how will it be paid?
(2) Duration of the Contract –Will the contract terminate at a certain date or upon a certain action?
(3) Notice and Cure- How can you ‘complain’ and within what time frame must they address the issue?
(4) Implied Warranties – Assumed warranties due to actions. Ex-they planted a tree on the property, we now own the tree.
(5) Limitation of Liability – Types and amounts of damages the vendor will be responsible for.
(6) Indemnity Clause – Mutual agreement of responsibility and compensation (or lack thereof – ‘Hold harmless”) for breach of contract terms.
(7) Arbitration Clause – Agreement to settle out of court.
(8) Attorney Fees – Who will pay for legal enforcement of contract terms?
(9) Choice of Law – Where will terms be legally enforced (usually a county or state)?
(10) Confidentiality Clause – You may wish to beef this up to apply to all matters on the property and all employees agents, and subagents of the vendor if you work in a high-profile home and include separate damages for breach of confidentiality.
(11) Assignment and Delegation – Does Joe’s landscape have to perform, or may they subcontract?
(12) Force Majeure – ‘Greater Force’, meaning the contract becomes voidable if Joe dies or the house burns down or something causing breach of contract beyond the control of the vedor.
(13) Integration Clause – Entire agreement; There are no other contracts or agreements other than contained in this contract.
(14) Time Is of the Essence Clause – In what time frame must actions by party A be takes in order for Party B to fulfill contract? Ex- Downpayment in 15 days..
Remember that contracts can be rewritten
If there is something that needs addressed, then have the contract rewritten to encompass the new terms you and the other party agree to. If the change is minor you can probably just scratch through the section on the contract and initial it. But if it is a major change it will be best to draft a new copy.
Never sign anything you don’t understand
Some legalese is designed with the sole intent of creating loopholes for the vendor to default without recourse. I don’t believe all contracts are designed that way, but I have seen enough to know they exist. Read and understand each line item on the contract before signing it. If you need help, reach out to your Principal’s legal or finance team. They’re an extension of your team and there to protect the Principal- use them.
Keep an original of the signed contract for your records
Don’t leave the only copy of the contract in the hands of the other party, and it’s best not to simply scan a copy. Make two sets for signing or request that the vendor bring two. Keep the paper for the term of the contract. It’s easy in this digital age to keep a file in the cloud or on our computer, but it’s also easier to alter a digital document and lessens your chance of winning a suit should you only have a digital copy that differs from an (altered) vendor copy at arbitration. Sadly, I write this from experience.
Recently, we have added service provisions to vendor contracts. We require vendors to perform agreement with the service expectations of the estate. To read more about vendor service guidelines see our post “Working With Vendors“.