What is a contract?
Although this might seem like a simple question, I find that there is a great deal of misunderstanding about what is and is not a contract. People tend to be misled by the title of a document into thinking it is not a contract when, in fact, it is. For example, an "Agreement," a "memorandum of understanding," a "settlement," a "lease,", etc. may all create legally binding contracts even if the word "contract" never appears in the document.
Any agreement may create a contract if it has three things:
- an offer to provide a good or service, or a promise to do something or to refrain from doing something,
- an acceptance of the offer, and
- "consideration," i.e., the exchange of something valuable (money, work, mutual obligations, etc.)
Additionally, the law requires that there be a "meeting of the minds" about the essential terms of the contract. Thus, if both parties are operating under a mutual mistake of fact about the contract, then there is no contract. For example, in a case where a buyer and seller were both mistaken about the amount of acreage contained in a piece of property they had agreed to transfer, the Court held that there was no "meeting of the minds" due to the mutual mistake of fact and, thus, there was no contract. Unilateral mistakes will not invalidate a contract unless they were induced by fraud.
Does a contract have to be in writing?
Contrary to popular belief, as a general rule, the answer is "no." A verbal agreement can create a legally binding contract. However, as a practical matter it may be hard to prove the existence or terms of the contract in case of a dispute unless there were witnesses to the parties' conversations.
There are statutes in North Carolina which require certain types of contracts to be in writing before the courts will enforce them. The most notable examples are contracts for the sale of real estate, leases of property for more than three years and contracts for the sale of goods worth $500 or more. As a matter of good practice, all contracts should be written and all University contracts must be put in writing.
What is a 'University contract'?
Contracts that obligate the University's resources or personnel in any way are "University contracts." In general, agreements are not University contracts if they are entered into on behalf of a foundation (including those affiliated with the University), a student organization, or purely private interests. If there is any question about whether an agreement qualifies as a University contract, please contact the University Counsel.
Can you give me some examples of University contracts?
The kinds of contracts we see are extremely varied; however, some typical examples include:
- Instructional and internship agreements
- Agreements with hotels and conference centers
- License agreements for plays and musicals
- Agreements with independent contractors
- Agreements with publishers
- Articulation agreements
- Donor agreements
- Event contracts
- Agreements for the use of University facilities
- Dormitory contracts
- Nondisclosure agreements
- Memorandums of understanding
- Mutual Aid agreements
- Personal service/consulting agreements
Does UNCG have a policy about University contracts?
Yes, in addition to policies of the Division of Business Affairs, Chancellor Sullivan recently approved a new Policy on Contract Review and Approval. That policy requires that all contracts which will bind the University or any of its subunits must be reviewed by the University Counsel. The Policy also specifies who is authorized to sign contracts.
Who is authorized to negotiate and sign contracts that bind UNCG or its units?
The new contracting policy states that As a general rule, only the Chancellor, the Provost, and certain Vice Chancellors have the authority to contract for the University.
Anyone else who enters into a contract that purports to bind the University or its subunits is acting without authority and can be held personally liable for the contract.
In general, the Vice Chancellor for Business Affairs signs all contracts except those for sponsored programs, EPA appointments outside of the Division of Business Affairs, and donor agreements: the Associate Provost for Research and Sponsored Programs has authority to sign contracts for sponsored programs, and the Provost and Vice Chancellors have authority to sign EPA appointment letters. The Vice Chancellor for University Advancement has authority for agreements relating to gifts and bequests.
These administrators have delegated certain parts of their authority to other individuals. If the signature authority to enter contracts on behalf of the University is passed beyond the level of a Dean or Director, it must be done in writing and with the approval of the appropriate Vice Chancellor or Provost.
Small purchases (up to $2,500) may be done by departments without going to a Vice Chancellor (or designee) for approval. Purchases between $2500 and $35,000 are normally executed through a purchase order issued from the NC State Purchasing Department. Bids are sought and standard Terms & Conditions are used in lieu of obtaining a Vice Chancellor's signature. Questions about purchasing procedures should be directed to the Director of Purchasing at 334-5830
Are there certain things that cannot appear in a University Contract?
Yes, the North Carolina Attorney General has provided a list of prohibited clauses including:
- Indemnification clauses
- Hold harmless agreements
- Agreements requiring the University to purchase liability insurance
- Agreement to be bound by the laws of a state other than North Carolina
- Binding arbitration agreements
- Agreements to waive a statute of limitations
- Agreements to keep information confidential that would otherwise be a public record under State law
The University Counsel has a complete listing and routinely checks all contracts for those prohibited clauses as part of the approval process. When such a clause appears, the University Counsel will negotiate with the other party in an effort to reach agreement on removal or modification of the prohibited clause.
Are there clauses which must appear in University contracts?
Yes, but this varies greatly depending on the type of contract under review. Generally, all contracts should have a beginning and ending date, provisions for termination prior to the ending date, designation of the responsibilities/obligations of the parties, a schedule of payments (if applicable), nondiscrimination and equal opportunity statements, and signatures by authorized individuals or officers.
I have other questions that you haven't answered.
Please contact the University Counsel's office at 334-3067 or University_Counsel@uncg.edu.