Frequently Asked Questions about Contracts
Is what I'm dealing with a "contract"?
An "agreement," a "memorandum of understanding," a "lease," a "license", etc. may all create legally binding contracts even if the word "contract" never appears in the document. A contract does not have to involve money (i.e. internships, confidentiality agreements, academic exchange programs) but may involve other forms of consideration (i.e. something of value). While a verbal agreement can create a legally binding contract, all University contracts must be put in writing. Be certain that you do not enter into an 'Accidental Contract'. (See section below.)
How to avoid an 'Accidental Contract".
Verbal discussions, a series of letters or emails, or a statement of 'intent' can be construed as creating a legally binding contract. Be certain that you do not enter into an 'Accidental Contract'. In order to avoid this from occurring, include a phrase such as "This is for discussion only" or "This is not a contract" in negotiation correspondence. In addition, use the University's standard forms or contact the General Counsel's Office. Be aware that the other party's 'standard' contracts can, and sometimes must, be modified; in either case, before signing one, contact the Purchasing Office or the General Counsel's Office.
Can I sign a university contract?
University contracts must be signed by authorized employees only. You may not execute a contract on behalf of the University unless you have received written delegated authority. The Chancellor has delegated signature authority to various positions at the University based upon the subject matter of the contract. Generally, the Vice-Chancellors have such authority.
Small purchases (under $5,000) are governed by the University's small purchase rules.
If you have delegated authority and desire to make a sub-delegation, contact the Office of the General Counsel. If you have delegated or sub-delegated authority and are uncertain whether your authority allows you to sign a particular contract, contact the Office of the General Counsel.
If you sign a University contract that you are not authorized to sign, you may be held personally liable.
Can I negotiate a contract?
If it is a responsibility or duty of your job, yes. If you are unsure about your authority to negotiate a particular contract, consult your supervisor. If you do negotiate a contract on the University's behalf, you must be aware of the prohibited and disfavored contract clauses that the University is obligated to follow as an agency of the State of North Carolina.
When negotiating a contract, what provisions are prohibited or disfavored?
The General Counsel's Office has a complete listing of prohibited provisions that is routinely updated. When such a clause appears, you will need to negotiate with the other party in an effort to reach agreement on removal or modification of the prohibited clause. If negotiation is unsuccessful, seek advice from the Office of the General Counsel or the Purchasing Office. A list of prohibited clauses, with some examples, includes the following:
- Indemnification clauses or hold harmless agreements that are in favor of the contractor. (Exp. "University shall defend, indemnify and hold harmless the Contractor against any and all loss, injury or other damage.")
- Limitations to the contractor's liability. (Exp. "In no event shall Contractor be liable for any damages arising from any breach of contract or liability in tort.")
- The contract states that a breach by the University would cause irreparable harm to the contractor and provides injunctive action.
- Waiver of the limits of the University's liability under the Tort Claims Act.
- Clauses granting the contractor a right to an acceleration of payments, liquidated damages and/or cancellation charges. (Exp. "If the University breaches the agreement, Contractor may accelerate and declare all obligations of the University immediately due and payable by the University.")
- The contract allows the contractor to unilaterally terminate the contract for cause, for convenience, or without a pro rata refund to the University for pre-paid services.
- Clauses that would make the contract subject to the laws or legal forums of a state other than North Carolina.
- Agreements requiring the University to purchase a bond, liability insurance or some other type of specialty insurance. UNCW is self-insured. Only the NC Department of Insurance may purchase additional insurance for UNCW. Specialty insurance policies may be available for certain university activities such as student internships, study abroad programs, automobile liability, and professional liability. Inquiries should be directed to Business Affairs or the Office of the General Counsel.
- Clauses which commit the University to binding arbitration.
- Agreements to waive a statute of limitations.
- Agreements to keep information confidential that would otherwise be a public record under State law.
- Clauses that alter N.C. general contract law, such as reducing the time in which to bring a suit for damages otherwise allowed by the North Carolina statute of limitations. (Exp. "Any legal action brought pursuant to the agreement shall be initiated within a period of one (1) year following the discovery by the party bringing the action of the event giving rise to the cause of action."
- Clauses authorizing the contractor to assign the right to receive payment from the University under the contract without subjecting the other party to the claims and defenses the University had against the contractor. (Exp. "Contractor may assign the performance of the agreement to a qualified third party.")
- The contract incorrectly names the University; the correct legal name is "The University of North Carolina at Wilmington".
- Clauses that require the University to pay all applicable taxes, including income or property taxes, which are properly the responsibility of the contractor.
- The contract permits the contractor to obtain a security interest in the goods being obtained by the University or to place a lien on University property.
- The contract provides for automatic renewal or renewal unless the University takes affirmative action to terminate.
- The contract allows the contractor to use the University's name in any advertising, endorsement, or promotion.
- Clauses that allow unlimited access to University premises.
- Clauses that allow someone other than the University to authorize maintenance service.
What contracts need to be approved by the UNCW Purchasing Department?
In general, contracts which involve a revenue producing activity or the procurement of goods or services must be submitted to the UNCW Purchasing Services Office for approval. These contracts require a signature from the UNCW Business Affairs Office. Contracts that do not go through the Purchasing Services Office include sponsored program agreements, construction and design services contracts, real property transactions, or University employment contracts (other than independent contractors).
Contracts that are submitted to the Purchasing Services Office must incorporate a set of standard terms and conditions. For any questions, a link to the Purchasing Office's web pages and its contact information can be found here.
Special note on purchasing personal services or consultants: Contracts to obtain the services of consultants are closely regulated by State law. Because each consulting or personal services contract you consider will involve different facts and circumstances, ALWAYS discuss any contract to obtain consultant services with the Purchasing Services Office BEFORE engaging in extensive negotiation of other contract details.
A failure to follow the rules set by the Purchasing Services Office can result in the contract being void. In addition, "the executive officer of such department, institution, agency or instrumentality shall be personally liable for the costs thereof". N.C.G.S. §143-58.
Can I make or administer a UNCW contract from which I derive a direct benefit?
No. N.C.G.S. §14-234 defines deriving a direct benefit as one of the following: (1) you or your spouse have more than a ten percent (10%) ownership or other interest in an entity that is a party to the contract; (2) you or your spouse derive any income or commission directly from the contract; or (3) you or your spouse acquire property under the contract. You could be found guilty of a Class 1 misdemeanor and the contract itself will be void.