Wednesday, December 3, 2014

5 Fatal Contract Mistakes

The 2014-2015 contract season is well underway for many contractors, but there are five key areas to watch out for.  Make sure you have protected your business the right way by following the ASCA's legal advisor Josh Ferguson's tips below.  To hear more from Josh on this topic and other legal issues facing our industry, tune in to Snow Magazine's free webinar on Friday, December 12th at 12pm EST.  Click here to register.

1.  Everyone's John Hancock
First off, I often see contracts that are not signed by all parties.  If a contract is not either fully executed, or executed in counterparts, it is simply not enforceable.  The simple solution is to make sure your file contains a fully executed contract.  Additionally, the contract should have a section that permits signing in counterparts, meaning that not everyone has to sign on the same document.  If the property owner/manager signs on one contract and the snow plow contractor signs on another contract, then it would be considered fully executed.

2.  Just say when
Often the duration of the service to be completed is left out of the contract.  The length of the contract is incredibly important. The exact dates the contract should be enforced need to be detailed clearly in the terms.  For example, if it's for only one winter, the contract should state: "This agreement shall remain in effect for the season starting November 15, 2014 and ending April 15, 2015 unless earlier terminated pursuant to this agreement or by applicable law."

3.  Unfinished business
Another major problem I see is the scope-of-work section does not properly detail the how, when and where the contractor will perform operations.  Even when there is sufficient detail, there is language that puts unfair, unattainable, and unrealistic requirements on the contractor.  For example, avoid "continuous" (i.e., "continuous service" or "continuous monitoring"); "bare pavement," "zero tolerance," or "slip-free conditions."  Instead, use words that permit servicing within a reasonable period of time and service that is consistent with Industry Standards.

4.  The Almighty's role
Fourth, the contract must contain language to limit responsibility for acts of God or other events out of the contractor's control.  For example, delays in performance caused by strikes, weather conditions and inability to obtain material.  This language is often missing and could play a role in defending claims from the property owner/manager for failure to perform duties, as well as claims from a slip-and-fall plaintiff.

5.  Bad language
Lastly, the indemnification and hold-harmless language is one of the most misunderstood sections of a contract. As a result, I see contractors sign and ask questions later.

Depending on whether the language is beneficial to the contractor or not, it can impact the liability of the parties, including the obligation to defend and indemnify. This language increases exposure, as the snow contractor's carrier will have to represent not only the insured, but also the indemnified parties.

It is incredibly important to avoid language that requires the contractor and their carrier to provide defense and indemnification in the following scenarios: (1) based solely on allegation in the Complaint (look for the words "threatened or alleged"), or (2) without regard to whose act or omission could have caused the alleged condition.

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