Essentials of a Binding Contract in Condominium Management
A binding contract ensures that both parties—the condominium corporation and the service provider—are legally obligated to uphold their agreed-upon duties.
Legal Definition of a Management Agreement
Under the Condominium Property Act, a management agreement is defined as:
An agreement entered into by a corporation governing the general control, management, and administration of the real and personal property of the corporation, the common property, and managed property.
This means that any service contract a condominium corporation enters into must comply with Alberta’s Condominium Property Act and clearly outline the roles and responsibilities of each party.
Key Components of a Legally Binding Contract
A contract must contain the following five elements to be legally enforceable:
Offer and Acceptance
One party (the offeror) makes a clear and definite offer.
The other party (the offeree) accepts the offer without modifications (otherwise, it becomes a counteroffer).
Example: A condominium corporation offers a contract to a janitorial company to clean the common areas three times per week for $3,000 per month, and the company accepts the terms in writing.
Consideration
Something of value must be exchanged between the parties.
Typically, this is money for services in a condominium management contract.
Example: The condominium corporation pays the janitorial company in exchange for cleaning services.
Intention to Create Legal Relations
Both parties must intend for the contract to be legally binding.
Example: A handshake agreement without a written contract may not be legally enforceable.
Capacity
The parties signing the contract must have the legal ability to do so. This means:
They are of legal age.
They are mentally competent.
They have legal authority (e.g., a condominium board member signing on behalf of the corporation).
Legality of Purpose
The contract must comply with the law.
If a contract includes illegal provisions, such as hiring unlicensed contractors, it is void and unenforceable.
Privity of Contract in Condominium Management
What is Privity of Contract?
Privity of contract is a legal principle stating that only the parties to a contract can enforce its terms or be held liable under it.
Why is Privity Important in Condominium Management?
Applies to Contracts Between the Condominium Corporation and Service Providers
The corporation (not individual unit owners) is responsible for upholding agreements with vendors, contractors, and management companies.
Example: If a condominium board hires a security company, only the board can enforce the contract—unit owners cannot demand security services beyond the agreed terms.
Prevents Third Parties from Enforcing the Contract
Unit owners, tenants, or other third parties cannot demand services beyond what is in the agreement.
Example: A unit owner cannot sue the cleaning company directly if they feel common areas aren’t clean enough. They must go through the board, which holds the contract.
Limits Liability to Contracting Parties
If the service provider fails to fulfill their obligations, the corporation (not individual unit owners) must initiate the dispute process.
Application in Service Contracts
Applying contract law principles when drafting or reviewing service agreements ensures clarity, compliance, and risk management.
Key Considerations for Condominium Service Contracts
Clarity of Terms
Clearly outline:
Scope of services (e.g., daily cleaning, weekly maintenance).
Payment structure (e.g., fixed fee vs. hourly billing).
Contract duration and renewal terms.
Termination conditions (e.g., breach of contract, non-performance).
Example: A security contract must specify the number of guards, patrol frequency, and reporting requirements.
Compliance with Alberta Laws
Service contracts must follow Alberta’s Condominium Property Act and Real Estate Act Rules.
Certain agreements, such as management contracts, require specific terms to be legally binding.
Risk Management Strategies
Contracts should include:
Dispute resolution clauses (e.g., mediation or arbitration before court action).
Liability and indemnification clauses to protect the condominium corporation.
Insurance requirements for service providers (e.g., contractors must carry liability insurance).
Maintaining Proper Documentation
Keep records of all contracts, amendments, and communication in writing.
Example: If a landscaping company changes its schedule, document the change in an official amendment rather than relying on verbal agreements.
Practical Application – Reviewing a Contract
Now that you understand the essentials of a binding contract, let's apply this knowledge to review a sample agreement.
Scenario
A condominium corporation is signing a two-year contract with a condominium management company. Before finalizing, the board wants to ensure the contract is legally binding and protects their interests.
Step-by-Step Contract Review
Does the contract contain all five key elements of a binding agreement?
Offer and acceptance
Consideration
Intention to create legal relations
Capacity of signatories
Legality of purpose
Does the contract define:
The scope of services?
Payment terms?
Dispute resolution methods?
Does the contract follow legislative requirements?
RECA Rules defining management agreements
Any necessary disclosures or legal notices
