Before the Board of Directors signs a contract with a vendor such as a contractor, architect, engineer, etc. please pay special attention to contract provisions that discuss indemnities, limitation of liability and insurance coverage. More often than not, these sections of the contract favor the vendor and can be detrimental for the Association. For example, some contracts contain language that limits the liability of the contractor to a specific amount in the event something goes wrong with the project. Associations may enter into a contract where the total amount of the contract is $5,000. The contract may limit the contractor's liability to the total amount of the contract, which at first glance, seems fair. However, if the contractor fails to perform the work to industry standards and that failure causes catastrophic damage to Association property, it will cost the Association more than $5,000 to repair the damage. Based on the contract terms, the Association will be limited to recovering $5,000 from the contractor and no more. The Association will not be made whole. For these reasons, it might be a good idea to have your Association's counsel review any contracts before they are signed.