In every contracting situation, from the smallest everyday project to the largest construction project, consider the following issues:
☐ Does the contractor have a valid California contractor’s license for the relevant specialty?
☐ Does the contractor have minimally acceptable levels of general liability insurance, automobile insurance and worker’s compensation insurance?
☐ Has the association been named as an additional insured on all of the contractor’s insurance policies?
☐ Have all the subcontractors submitted proof of their contractor’s licenses and insurance policies?
☐ Have all HOA and insured versus insured exclusion and contractor’s condition endorsements been deleted?
☐ Has the contractor complied with all of the association’s bidding requirements?
☐ Has the contractor supplied references and have the references been checked?
☐ Is there a written contract?
☐ Has the scope of the work to be performed been clearly defined?
☐ Does the association have to pay start-up costs to the contractor? Is the amount of the start-up costs reasonable (less than 10% of the total contract price)?
☐ Are progress payments required at reasonable intervals? Have payment obligations such as “upon delivery” been deleted?
☐ Have the payment provisions been written so that the association only pays for work that has been satisfactory completed?
☐ Is the contractor required to submit mechanics’ lien releases before each payment?
☐ Should the association write joint checks to the contractor and subcontractors if unconditional lien releases are not provided?
☐ Can the association hold retention from each progress payment until the end of the contract?
☐ Is final payment required after all mechanics’ lien rights have been expired?
☐ Are the starting and completion dates clearly specified?
☐ Is there a liquidated damages (predetermined monetary payment) provision in the contract?
☐ Would a performance bonus provision provide incentive to the contractor to finish earlier than required?
☐ Can the association terminate the contract “without cause?” If “cause” is required, is it clear under what condition the contract can be terminated?
☐ Has the contractor clearly indicated the warranties being given? Are there any materials manufacturer’s warranties?
☐ What exclusions are there in the warranties? Are these exclusions reasonable?
☐ Will the contractor be required to supply a performance bond or labor & materials bond?
☐ Is the contractor required to indemnify the association for its negligent acts and omissions?
☐ Have all obligations of the association to indemnify the other party been deleted from the contract?
☐ Have limitation of liability clauses been deleted?
☐ Does the contract require some form of Alternative Dispute Resolution mediation or arbitration) prior to or in lieu of litigation?
☐ Is there an attorneys’ fee provision in the contract?
☐ Has the contract been reviewed by legal counsel?