Transcript Contracting Basics - Texas State University

Overview of issues involved in
preparing and executing contracts at
Texas State
Rev. November 16, 2010
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What is a Contract?
When Is A Contract Created?
Who Can Sign A Contract?
Who Is Authorized To Sign For Texas State?
University Contracting Policies and
Procedures
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Essential Contract Terms and Conditions
Terms & Conditions To Consider
Other Critical Contract Issues
What Is Difference Between A PO & Contract?
Contracting Resources
Questions or Clarifications?
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Texas courts define a contract as a promise
or a set of promises to which the law attaches
legal obligation. i
The law regards the performance of these
promises as a duty and provides a remedy for
the breach of this duty. ii
C & H Transportation Company v. Wright, 396 S. W. 2d 443, 446 (Civ App.-Tyler 1965,
ref. n.r.e.).
Foster v. Wagner, 343 S. W. 2d 914, 927 (Civ.App.-El Paso 1961, ref. n.r.e.).
The essential elements necessary to form a
binding contract are usually described as: i
◦ An Offer (to do or not to do something)
◦ An Acceptance (in strict compliance with the terms of the
offer)
◦ Legal Purpose/Objective
◦ Mutuality of Obligation (e.g. “meeting of the minds”)
◦ Consideration (may be monetary or non-monetary)
◦ Competent Parties (i.e. cannot be insane, drunk or a minor,
etc.)
i See Buxani v. Nussbaum, 940 S. W. 2d 350, 352 (Tex App.-San Antonio 1997, no writ);
and Hallmark v Hand, 885 S.W.2d 471, 476 (Tex.App.-El Paso 1994, writ denied): see
also McCulley Fine Arts Gallery, Inc. v “X” Partners, 860 S.W.2d 473, 477 (Tex. App. - El
Paso, 1993, no writ).
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Common Types of Contracts:
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Purchase Orders
Personal Services
Construction
Price or Purchase Agreements
Consultant or Professional Services
Temporary Employment
Maintenance and Repair
Lease or Rental of Space or Equipment
Intellectual Property Rights
Upon the signing of the contract by
all of the contracting parties (e.g.
“execution of contract”):
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◦ Original signatures by those authorized to sign a
contract are the usually accepted norm; however an
oral contract may be binding except for certain
types of contracts. i
◦ Faxed signatures or emails should always be
followed up with original signatures.
AG Opinion JC-0132 (1999).
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There may be instances where time
considerations or situations (e.g.
emergencies) dictate the need to accept a
faxed signature as “evidence” of acceptance
of the contract terms.
It is possible that an email, or a chain of
emails, that make it clear a party accepts the
terms of a contract can be enforceable.
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i
Creating “quasi-contracts” or entering into
oral contracts in lieu of executing a written
contract should be avoided.
If problems arise it may require legal action
to determine whether or not a contract exists
and is enforceable.
Virtual or electronic signatures and contracts
have recently been defined in law and are still
being tested in courts. i
TEXAS BUSINESS & COMMERCE CODE § 43.017. “ACCEPTANCE AND DISTRIBUTION OF
ELECTRONIC RECORDS BY GOVERNMENTAL AGENCIES”
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Only persons having actual authority to act
on behalf of the State can bind the State in a
contract. i
One should not indulge in presumptions or
rely on the implied authority of an officer or
agency of the State to contract. ii
AG Opinion JC-0132 (1999).
State v. Ragland Clinic=Hosp., 138 Tex. 393, 159 S.W. 2d 105 (1942).; State ex rel.
Dept. of Criminal Justice v. VitaPro Foods, Inc. 8 S.W.3d 316, 322 (Tex. 1999). Rehearing
overruled.
An individual executing a contract on behalf of
a State agency, without the authority to do
so, may be personally liable for damages
flowing from repudiation of the contract. i
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See Thomas, Richardson, Runden & Company, Inc. v. State of Texas, 683 S.W.2d 100 (Tex.
App. - Tyler 1985 writ ref d n.r.e.)
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University President;
Division Cabinet Officers; and,
Employees delegated specific contracting
approval authority in accordance with UPPS
03.04.02 “Contracting Authority to Commit
the University“.
If unsure, check with University Attorney’s
Office which maintains list of authorized
Texas State signers.
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UPPS’S:
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FSS/PPS’S:
◦ UPPS 03.04.01 “Contracted Services, Including
Consultants, Speakers, and Other”
◦ UPPS 03.04.02 “Contracting Authority”
◦ UPPS 03.04.04 “Processing, Approving and
Executing Contracts, Purchases and Agreements”
◦ UPPS 03.04.07 “Interagency or Interlocal
Cooperation Contracts”
◦ UPPS 03.04.08 “Administration and Management
of Major Contracts for Goods and Services”
◦ 08.01.01 “Facilities Leases”
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Applicable Law (Texas Law Must Prevail)
Limits of Liability (Only To The Extent Allowed By
Texas Laws and Constitution)
Payment Terms (Prompt Payment Act)
Dispute Resolution (Alternative Dispute
Resolution Process)
Other State Mandates (HUB Subcontracting Plan
Requirements, Disclosures and Affirmations, etc.)
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Insurance requirements
Indemnification
Deliverable schedules
Progress billing
Shipping and delivery
Communication plans
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“Force Majeure” (i.e. “Acts of God”):
◦ What is it;
◦ When does it apply; and,
◦ For how long?
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Pre-defined remedies for non- or substandard performance:
◦ Liquidated damages;
◦ Performance bonds; and,
◦ Termination.
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Right of contract assignment
Right to audit
Behavior of contractor’s and subcontractor’s
employees
Warranties
Transfer or replacement of Contractor’s key
personnel
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Contract renewal options
Right to “piggyback” on contract by others
Confidentiality
Acceptance
Price Adjustments
“Funding Out” clause
Network Hardware and Software Certifications
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Review of Debarred or excluded Vendor’s
lists:
◦ Federal
◦ State
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State Comptroller holds:
◦ Franchise Tax
◦ Indebtedness to State
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Contract change management plan and
process
Environmental health and safety
Intellectual property rights
Contractor/subcontractor travel and expense
reimbursements
Independent contractor or employee
determination
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Access to secure areas/information
Control of keys
Site clean-up
Waste disposal
Surplus
On-site Contractor coordination
Owner supplied resources
Liquidated damages
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Nepotism disclosure
Conflict of interest
“Open Records” or public disclosure
Press Releases
Recruitment or hiring of Owner’s employees
Right of offset
Contractor background checks
Contract Risk Identification, Assessment and
Management Considerations:
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Address;
Avoid;
Shift;
Eliminate; or,
Mitigate
Constitutional and statutory limitations on the
authority of the University to enter into
certain terms and conditions including, but
not limited to:
Liens on University’s property;
Waivers, disclaimers and limitations;
Granting control of litigation or settlement to another party;
Liability for acts or omissions of third parties;
Payment of attorneys’ fees; dispute resolution; indemnities;
and,
◦ Confidentiality.
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NOTE:
Any Exceptions To Texas State’s
Terms & Conditions, Or Additional Terms Or
Conditions Proposed By A Vendor, Should
Always Be Reviewed By The University
Attorney, Or The Contract Compliance Office,
To Make Sure The University’s Best Interests
Are Protected and Maintained.
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A Contract is a mutual agreement between
contracting parties that contains the essential
elements of a contract
A PO is normally only considered an offer to
purchase something when issued; it becomes
a contract when the Vendor :
◦ issues an acknowledgement accepting the PO’s T’s
& C’s without changes; or,
◦ ships the goods or provides services in accordance
with the PO.
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PO’s are normally used to purchase goods.
Contracts are normally used to purchase
services.
Make sure a contract is executed when
needed (i.e. reduce risk exposure, identify
responsibilities, define performance
standards, remedies and expectations, etc.).
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Texas State does use PO’s to purchase some
services without executing a separate
contract.
If used without a contract, need to determine
University’s risk exposure.
May need to add additional terms &
conditions to the PO’s standard T’s & C’s
boilerplate to address identified risks or other
contract issues.
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Purchases of goods are governed by the
Uniform Commercial Code (UCC) (e.g. “Law of
Merchants”) as adopted by the State of Texas.
If a PO is used and issues arise that are not
addressed in the PO’s T’s & C’s, or the
Seller’s and Buyer’s T&C’s conflict (i.e. "Battle
of the forms”), if taken to litigation the UCC
will normally apply.
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Services are governed by the contract’s T’s &
C’s (e.g. “within the 4 corners of the
document”) which have been previously
mutually agreed upon by the contracting
parties.
If a contract is used to purchase services and
issues arise, previous court cases and rulings
(e.g. Common Law) will normally apply if
taken to litigation.
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PO’s are usually of a short term (e.g. usually
less than one year) or of a one-time nature.
Contracts may be of a long term (i.e. more
than one year) and may include multiple
renewal options.
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PO T’s & C’s are generally written to modify
parts of the UCC that tend to favor the
Vendor over the Buyer.
Contract T’s & C’s are usually much more
detailed including setting out scope of work,
communication and change management
plans, deliverables, contingencies and
performance standards and remedies, etc.,.
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At Texas State a PO is also used to commit or
encumber funds to pay for purchases.
It is strongly recommended that a requisition
be created and a PO be issued referring to the
contract in order to commit funds to pay for
the contracted goods or services within the
current fiscal year.
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Texas Procurement and Support Services
(TPASS) Division of the State Comptroller's
Office “Contract Management Guide”
Department of Information Resources (DIR)
“Project Delivery Framework”
Contact Rob Moerke
Director of Contract Compliance:
 Telephone –
512.245.2550
 E-mail –
[email protected]
 URL –
http://www.fss.txstate.edu/FinancialServices/d
epartments/contract.html