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Sweetheart Contract

By on July 12, 2019

A sweetheart contract is a street term to describe agreements made between two parties that don’t conform to market prices, which would ultimately be paid by clients.

The basic objective of a buyer would be to get as much value as possible and pay as little as possible. While a seller would want to sell as high a price as possible and deliver as little as possible.

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Sweetheart contracts are often geared towards favoring the seller or service provider with contracts signed without much negotiation.

A big reason for this is that the two are actually related parties.

For example, a developer or management company might hire a highly priced contractor and pass on the costs to home owners.

These days, property owners are more aware of such practices that take advantage of their goodwill and would take developers to task for suspicious relationships between them and vendors or suppliers.

There was a period of time when such unethical business practices were widespread. But they have been slowly weeded out by the law.

However, there are always ways to get around them and homeowners should continue to be diligent to prevent being taken for a ride by management companies.



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