Q: Our association has a contract with a landscaping vendor that is becoming a problem. At first, we were happy with the service and we signed the contract presented to us. Now, we cannot terminate the vendor without a significant financial penalty and the vendor has threatened to sue our association for tens of thousands plus attorney’s fees if we terminate early. Do you think we have any legal recourse, or are we stuck with this vendor?
A: You may not have much legal recourse if you signed the vendor’s contract form, but you need to check with your association’s legal counsel as the contract might have a termination remedy for “cause” and allow you to cancel for poor performance. The ideal termination provision allows the Association the right to terminate the contract, without cause, by giving 30 days prior notice. Many vendors will push back when the association insists on the 30-day cancellation provision, but if they want the business and intend on doing a great job, many vendors will accept such a provision.
The vendor’s form you signed probably provides that the “term” of the contract is for one year and the contract will automatically renew for another full year unless one of the parties provides written notice of cancelation at least 30, 60, or even 90 days prior to the anniversary date. But even when the association agrees to a minimum term of one year, the automatic renewal provision should always be stricken and replaced with a provision for a month-to-month renewal after the initial term. We strongly advise our clients against agreeing to a minimum term of more than one year for landscaping or similar service contracts. It is worth spending money for your attorney to briefly review these contracts before entering into contracts obligating your association. If this vendor does sue you and prevails, you might have to assess your members to pay the judgment against the association.