Signing Contracts that have precedence over our Governing Documents

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Our Board entered into a contract with Mid-Atlantic that violates our Bylaws that require the agreement cancelable with or without cause as required in Termination of Manager's Contract:

All Manager contracts must be terminable by either party upon thirty (30) days written notice for cause, and upon sixty (60) days written notice without cause.

Our Bylaws also define Indemnification for the manager which appears to be very generous: Indemnification of the Manager.

The Association may agree to indemnify and hold the Manager harmless for all acts of the Manager done by, or on behalf of the Association, except those acts which represent gross negligence, a breach of the Governing Documents or applicable law, or willful misconduct by the Manager The Association may name the Manager as an additional insured on any insurance policy maintained by the Association in order to effect the foregoing indemnification.

Apparently, not generous enough for Associa Mid-Atlantic Management Corporation. From their contract:

In circumstances where provisions of this Agreement are in conflict with Section 2 and Section 4 of the Bylaws, this Agreement shall apply. The Client also acknowledges this Agreement is the notice required under Section 1F of the Bylaws.

Here's the title page of the auto-renewing, non-cancelable with cause (requires mandatory arbitration) contract: Associa Contract Title Page

Who would sign such a contract and why?: Associa Contract Signature Page

This complicity between two Board members, Marian Derr and Lynne Zane with Associa Mid-Atlantic Management is appalling. What were their reasons for providing such favorable conditions to the management company in breach of their fiduciary fidelity, particularly when no competitive bids were undertaken?

A Hypothetical Conversation with an Attorney

(consider this a piece of fiction)

Can board members sign contracts that supersede our Declaration and Bylaws?

No. In your case the management contract doesn't supersede but contradicts the By-Laws. The fact that the board is contracting which violates the Declaration and By-Laws is an "ultra vires" act and violation of their fiduciary duties.

Ultra vires is a Latin phrase meaning literally "beyond the powers", although its standard legal translation and substitute is "beyond power". If an act requires legal authority and it is done with such authority, it is characterized in law as intra vires (literally "within the powers"; standard legal translation and substitute, "within power"). If it is done without such authority, it is ultra vires. Acts that are intra vires may equivalently be termed "valid" and those that are ultra vires "invalid". [Wikipedia]

The board can be ousted for breach of their fiduciary duties and be personally liable for any damages to the members and HOA.

Is our association required to honor the contracts?

The problem is - that the board had the "apparent" authority to enter the contract.

Apparent authority (also called "ostensible authority") relates to the doctrines of the law of agency. It is relevant particularly in corporate law and constitutional law. Apparent authority refers to a situation where a reasonable person would understand that an agent had authority to act. This means a principal is bound by the agent's actions, even though the agent had no actual authority, whether express or implied. It raises an estoppel because the third party is given an assurance, which he relies on and would be inequitable for the principal to deny the authority given. Apparent authority can legally be found, even though actually authority has not been.

So unless the management firm knew that the board was contracting in contravention of the Declaration and By-Laws - they can hold the HOA liable as per the contract. Then the memberships only alternative is to oust the board and potentially hold them personally liable because of their breach of fiduciary duties and ultra vires acts.

The management company clearly knew, written into their contract under the first section, PARTIES:

In circumstances where provisions of this Agreement are in conflict with Section 2 and Section 4 of the Bylaws, this Agreement shall apply. The Client also acknowledges this Agreement is the notice required under Section 1F of the Bylaws.

Without going into details here, these sections deal with indemnification of Management Company and term and cancelability of the contract

Both the management company and Board were aware the contract contradicted the Bylaws when the contract was signed as it is documented in the contract itself.

Then if they knew - they also know that the agreement violates or contradicts the By-Laws which it can't supersede.

That agreement is voidable because they know it's contradicting the By-Laws which it can't do. Moreover, they know or should know that the board does not have the power and authority to bind the HOA in contradiction to the By-Laws and Declaration.

As such, that contract is void or voidable as per the By-Laws which they know control.

Are board members that sign such contracts acting in Good Faith?

Clearly - NO.