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Overview of issues involved in preparing and executing contracts at Texas State Rev. November 16, 2010.

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Presentation on theme: "Overview of issues involved in preparing and executing contracts at Texas State Rev. November 16, 2010."— Presentation transcript:

1 Overview of issues involved in preparing and executing contracts at Texas State Rev. November 16, 2010

2  What is a Contract? What is a Contract?  When Is A Contract Created? When Is A Contract Created?  Who Can Sign A Contract? Who Can Sign A Contract?  Who Is Authorized To Sign For Texas State? Who Is Authorized To Sign For Texas State?  University Contracting Policies and Procedures University Contracting Policies and Procedures

3  Essential Contract Terms and Conditions Essential Contract Terms and Conditions  Terms & Conditions To Consider Terms & Conditions To Consider  Other Critical Contract Issues Other Critical Contract Issues  What Is Difference Between A PO & Contract? What Is Difference Between A PO & Contract?  Contracting Resources Contracting Resources  Questions or Clarifications? Questions or Clarifications?

4  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 i C & H Transportation Company v. Wright, 396 S. W. 2d 443, 446 (Civ App.-Tyler 1965, ref. n.r.e.). ii Foster v. Wagner, 343 S. W. 2d 914, 927 (Civ.App.-El Paso 1961, ref. n.r.e.).

5 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).

6  Common Types of Contracts: ◦ 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

7  Special agreement types which may or may not be a contract: ◦ Non-compete ◦ Memorandum of Understanding ◦ Confidentiality ◦ Right of First Refusal ◦ Letter of Intent  Check with Office of Contract Compliance or University Attorney if unsure whether contract or not.

8 Upon the signing of the contract by all of the contracting parties (e.g. “execution of contract”): ◦ 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 s should always be followed up with original signatures. i AG Opinion JC-0132 (1999).

9  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 , or a chain of s, that make it clear a party accepts the terms of a contract can be enforceable.

10  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 i TEXAS BUSINESS & COMMERCE CODE § “ACCEPTANCE AND DISTRIBUTION OF ELECTRONIC RECORDS BY GOVERNMENTAL AGENCIES”

11  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 i AG Opinion JC-0132 (1999). ii 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.

12 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 i 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.)

13  University President;  Division Cabinet Officers; and,  Employees delegated specific contracting approval authority in accordance with UPPS “Contracting Authority to Commit the University“.UPPS  If unsure, check with University Attorney’s Office which maintains list of authorized Texas State signers.University Attorney’s Office list of authorized Texas State signers

14  UPPS’S: ◦ UPPS “Contracted Services, Including Consultants, Speakers, and Other” UPPS ◦ UPPS “Contracting Authority” UPPS ◦ UPPS “Processing, Approving and Executing Contracts, Purchases and Agreements” UPPS ◦ UPPS “Interagency or Interlocal Cooperation Contracts” UPPS ◦ UPPS “Administration and Management of Major Contracts for Goods and Services” UPPS  FSS/PPS’S: ◦ “Facilities Leases”

15  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.) HUB Subcontracting Plan

16  Insurance requirements  Indemnification  Deliverable schedules  Progress billing  Shipping and delivery  Communication plans

17  “Force Majeure” (i.e. “Acts of God”): ◦ What is it; ◦ When does it apply; and, ◦ For how long?  Pre-defined remedies for non- or sub- standard performance: ◦ Liquidated damages; ◦ Performance bonds; and, ◦ Termination.

18  Right of contract assignment  Right to audit  Behavior of contractor’s and subcontractor’s employees  Warranties  Transfer or replacement of Contractor’s key personnel

19  Contract renewal options  Right to “piggyback” on contract by others  Confidentiality  Acceptance  Price Adjustments  “Funding Out” clause  Network Hardware and Software Certifications

20  Review of Debarred or excluded Vendor’s lists: ◦ Federal Federal ◦ State State  State Comptroller holds: ◦ Franchise Tax Franchise Tax ◦ Indebtedness to State Indebtedness to State

21  Contract change management plan and process  Environmental health and safety  Intellectual property rights  Contractor/subcontractor travel and expense reimbursements  Independent contractor or employee determination

22  Access to secure areas/information  Control of keys  Site clean-up  Waste disposal  Surplus  On-site Contractor coordination  Owner supplied resources  Liquidated damages

23  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

24 Contract Risk Identification, Assessment and Management Considerations: ◦ Address; ◦ Avoid; ◦ Shift; ◦ Eliminate; or, ◦ Mitigate

25 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.

26 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.

27  A Contract is a mutual agreement between contracting parties that contains the essential elements of a contract 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.

28  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.).

29  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.

30  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.

31  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.

32  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.

33  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.,.

34  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.

35  Texas Procurement and Support Services (TPASS) Division of the State Comptroller's Office “Contract Management Guide”“Contract Management Guide”  Department of Information Resources (DIR) “Project Delivery Framework” “Project Delivery Framework”

36 Contact Rob Moerke Director of Contract Compliance:  Telephone –  –  URL – epartments/contract.html


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