As a contract and litigation attorney for the past 27 years, I am often asked to evaluate a contract dispute for a client. This could involve contracts for construction, real estate, services or many other types of contracts.
I am frequently asked to review contracts that lack important provisions or key terms between the parties, or contain inadequate definitions of the scope of work or services to be provided. Often, the deficiencies in the contract can lead to problems in the event of a dispute. I find that frequently there was little to no discussion between the parties about what should be in the contract. This occurs much more often in the context of construction contracts or contracts for services.
On such occasions, the contract document is simply provided to the other party who signs it without asking for terms to be altered or added.
In many cases, one party provides a document to the other, which might be labeled an estimate, proposal, work order, purchase agreement or contract. Sometimes, these documents have conditions in smaller print on the back or appended to the document. The receiving party might choose to accept the document without comment, or, in some instances, the receiving party might not even sign the document and the parties just proceed as if it had been signed.
One party would carry out the services obligations of the contract and the other party, ultimately, would pay for the services. This is fine when everything goes well with the contract and the intent of the contract is met. However, when a problem arises, the fact that there was no real negotiation of the contract terms (other than perhaps price, what is being provided for the price and maybe the time for performance) can create real problems in getting the dispute adequately resolved for the injured party.
One of the most important items often omitted from contracts is recovering attorney’s fees in the event of a dispute. Under Colorado law, each party in a lawsuit or arbitration is responsible for bearing their own attorney’s fees. The main exception to this rule is where there is an attorney’s fees shifting provision either in the contract or, in limited instances, in a statute.
Fee shifting provisions generally come in two different forms:
A prevailing party clause where the party that is determined to have prevailed in the litigation can be awarded its attorney’s fees; A one-way provision (you see these provisions in many credit agreements and similar types of contracts) where the party providing the service is entitled to attorney’s fees if it has to undertake collection efforts to get paid.With respect to the one-way attorney’s fees provision, often the party that is being presented with the contract provision does not object to the language. This can result in that party not having the right to collect attorney’s fees in the event that the services provider does something wrong.
Of course, many large corporate entities will not agree to change the terms of a contract; however, there never is any harm in asking for a contract provision to be amended or added before entering into the contract. The main problem with a lack of an attorney’s fees provision is that litigation can be expensive and, in many cases, the costs of trying to enforce your rights in court may not make economic sense where the costs of the litigation would be close to the claim amount.
Other provisions that often are lacking or not well-defined in contracts may include the time for complete performance of the contract, what happens in the event of a dispute or even a complete definition of the full scope of the contractual obligations of each party. Additionally, the contract might have a provision that would be objectionable or onerous to the other party, such as an arbitration provision.
Whether the contract is for $1,000 or $100,000, it is important to make sure you have all of the provisions in the contract that will protect you in the event of a dispute. If a problem arises, the contract language can be extremely important in determining whether you can successfully enforce your rights and be made whole.
While an attorney is not always needed to review a contract for you, the cost of the contract can make it worthwhile to have an attorney review the contract for you before signing.
Ken Golden is a partner with the law firm of Gregory, Golden & Landeryou, LLC. Reach him at 247-3123.