Texas State Contract Preparation and Execution Overview
Understanding the essential elements and types of contracts, who can sign them, and the legal implications in Texas State. Learn about contract creation, authorized signatories, common contract types, and the importance of original signatures for execution.
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Overview of issues involved in preparing and executing contracts at Texas State Rev. November 16, 2010
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
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?
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.). iiFoster 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.) iSee 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).
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
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 emails should always be followed up with original signatures. iAG Opinion JC-0132 (1999). Upon the signing of the contract by all of the contracting parties (e.g. execution of contract ):
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.
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 iTEXAS BUSINESS & COMMERCE CODE 43.017. ACCEPTANCE AND DISTRIBUTION OF ELECTRONIC RECORDS BY GOVERNMENTAL AGENCIES
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 iAG Opinion JC-0132 (1999). iiState 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, so flowing from repudiation of the contract. An individual executing a contract on behalf of a State agency, without the authority to do so, may be flowing from repudiation of the contract. i i without the authority to do , may be personally liable personally liable for damages for damages 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.)
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.
UPPSS: 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 FSS/PPS S: 08.01.01 Facilities Leases
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.)
Insurance requirements Indemnification Deliverable schedules Progress billing Shipping and delivery Communication plans
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.
Right of contract assignment Right to audit Behavior of contractor s and subcontractor s employees Warranties Transfer or replacement of Contractor s key personnel
Contract renewal options Right to piggyback on contract by others Confidentiality Acceptance Price Adjustments Funding Out clause Network Hardware and Software Certifications
Review of Debarred or excluded Vendors lists: Federal State State Comptroller holds: Franchise Tax Indebtedness to State
Contract change management plan and process Environmental health and safety Intellectual property rights Contractor/subcontractor travel and expense reimbursements Independent contractor or employee determination
Access to secure areas/information Control of keys Site clean-up Waste disposal Surplus On-site Contractor coordination Owner supplied resources Liquidated damages
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: Address; Avoid; Shift; Eliminate; or, Mitigate Contract Risk Identification, Assessment and Management Considerations:
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. Constitutional and statutory limitations on the authority of the University to enter into certain terms and conditions including, but not limited to:
NOTE: 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. NOTE: 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. Any Exceptions To Texas State s Any Exceptions To Texas State s
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.
POs 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.).
Texas State does use POs 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.
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.
Services are governed by the contracts Ts & 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.
POs 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.
PO Ts & Cs 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.,.
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.
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 rm01@txstate.edu URL http://www.fss.txstate.edu/FinancialServices/d epartments/contract.html
