Read More »" /> The Devil is in the Details. Randal Pentiuk; Pentiuk; Couvreur & Kobiljak P.C. | National Cooperative Law Center - Part 2

The Devil is in the Details

Rule #1: Require the Vendor to have and produce Workers’ Compensation coverage. If someone working for the vendor is injured while working on your Cooperative’s project and your vendor does not have worker’s compensation, that injured person will be able to recover from the Cooperative. Therefore, it is a simple preventative matter to require evidence of the coverage.

One nonprofit learned this lesson the hard way. It was a simple job, involving repairing a stairwell. It seemed like a small matter and so a friendly local vendor was summoned, and a very reasonable price was agreed upon. The vendor, who happened to be a one-man shop, came with a friend who was to help. Unfortunately, this friend was not very adept with power tools and was injured by a saw. Much to the surprise of this nonprofit, the friendly vendor did not have any workers’ compensation and, under Michigan law, the injured assistant was able to recover from the nonprofit. Of course, the result would have been different if Rule #1 had been followed.

Rule #2: Get guarantees in writing. Being precise and having the legal ability to force a vendor to keep its word depends on having a written deal. Here, there are actually two rules in one – first, get it down in writing; second, make sure the deal is clear.

As to the first point, Cooperatives are reluctant to spend money on legal fees to prepare a contract for every single transaction. That makes sense and for that reason, we have standard “wrap around” agreements for Cooperatives, that contain the essential elements of typical deals yet allows a vendor and Board to tailor the performance aspects.  This provides a handy tool for the Board and Manager to quickly and inexpensively provide a written contract that, in turn, incorporates an attached performance bid specification and the vendor’s proposal. If the vendor’s form has fine print that conflicts with the standard “wrap around” agreement, it is resolved in favor of the standard “wrap around” contract by that instrument’s terms.

This tool is good for many smaller transactions. Larger ones, where more is at risk, should involve the Cooperative Attorney. The Manager should be involved in deciding whether the size and complexity of the deal requires legal assistance. Failing to get legal help is penny wise and pound foolish, and eventually catches up to those cutting corners.

Related to this point is the need to spell things out. Ambiguity is as fatal to a claim that the vendor failed to do the agreed upon job as is not having it defined at all.  More detail here is better than brevity. Use layperson’s language and insist on being able to understand it. You need to play “devil’s advocate” and think of the various scenarios possible. If the Board is hiring someone to replace gutters, think about what should happen if the underlying wood is rotted out. Managers should be helpful in this regard.  Of course, no one has experience in all matters so do not hesitate to seek other experienced help.

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