Formal Review of the Terms & Conditions
Matching the Terms with the Service
Refining the SOS, if necessary
Depending upon the nature of the contract, the Contracts Office will work with the department and the Purchasing Office to review and finalize the associated scope of services (SOS).
Note : As the “owner” of the agreement, the department must review and approve modifications to business terms.
Matching the Terms to the SOS
It is important that the terms & conditions of a contract appropriately coordinate with services. For instance, a contract for hosted database services (where UTSA information will be stored on third-party servers) will almost certainly require detailed confidentiality provisions, liabilities for data loss, and remedies for breaches of confidentiality. A contract for “off-the-shelf” software may not need any of these types of provisions. In both of these examples, however, an intellectual property indemnification should definitely be incorporated into the contract. As another example, an advertising, marketing, or seminar agreement will probably require language limiting the use of UTSA’s name, logo, and marks.
Redrafting & Negotiation
Compliance with Applicable Laws and Policies
The Contracts Office will analyze and review applicable legal terms and conditions to ensure protection of the University, as well as compliance with applicable state laws, UT System policies, and University regulations. See Common Contractual Terms Explained and Statutorily Required Clauses for further information.
Negotiation
The Contracts Office will facilitate any required negotiations with the vendor’s legal office or contract officers. The Contracts Office will maintain continuous consultation with the department, specifically in the area of business issues.
Major Areas within Every Contract
Generally, you will find the following components within any typical service agreement:
- Parties
- Typically defined in an opening paragraph. The opening generally delineates the parties with defined terms to be used throughout the agreement (i.e. “University” and “Contractor”) The opening paragraph also defines the agreement itself (i.e. a software license & support agreement defined as the “License Agreement”) and may establish the “effective date” of the contract
- Statement of Services [Possibly within an Exhibit or Attachment]
- Details defining the Scope of Services and specifications
- Contractor requirements and deliverables
- Pricing [
Possibly within an Exhibit or Attachment
]
- Rate fees
- Price structures
- Payment terms
- Audit rights
- Performance Standards [
Possibly within an Exhibit or Attachment
]
- Schedule of Services
- Quality Control
- Inspection
- Approvals
- Liquidated Damages
- Term & Termination
- Term of contract
- Termination provisions (for cause & possibly convenience)
- Survival of Certain Provisions & other Termination issues
- Warranties
- Compliance with Laws/Regulations/Policies
- Specific licensing, education, and/or training requirements
- Express Warranties of Scope/Service
- Ownership of technology and warranty against infringement
- Confidentiality issues
- Risk Allocation & Remedies
- Limitations of Liability
- Disclaimers
- Indemnification
- Insurance
- Boilerplate
- Governing Law & Venue
- Entire Agreement clause
- Notices
- Records
- Severability
- Force Majeure
- Statutory Dispute Resolution requirements
- Other Statutory clauses
- Signatures
- Any Necessary Exhibits or Attachments
Sample contracts and template agreements.
Common Contractual Terms Explained
Frequently Negotiated Clauses
Below are three of the most commonly negotiated and contentious provisions found in service contracts. Departments that are confronted issues regarding these clauses (including the examples below) should consult the Contract Office or the Legal Affairs Department.
- Warranties & Warranty Disclaimers:
Warranties are simply representations by the seller to the buyer regarding the quality, characteristics, condition, or performance of the services. Disclaimers are methods for negating or limiting a specific warranty. Although most individuals are familiar with the typical product or seller warranties, there are additional warranties that may be necessary. For instance, it may be necessary to include warranties regarding licenses, permits, or certifications, or warranties that the contractor will comply with, all applicable federal, state, and local laws and regulations. If a contractor will perform work on site, the contractor should warrant that it will comply with University policies and the rules and regulations of the Board of Regents. When purchasing services containing intellectual property rights (i.e. software or technology), the contractor should also warrant that it has the full ownership rights to sell the product and services. - Indemnification:
An indemnification is simply a protection against loss or liability resulting from third party claims. To indemnify someone means you will reimburse them, or “hold them harmless” from any damages and costs associated with third-party claims.Example:
If UTSA purchases software from ABC Company, then UTSA should receive two specific protections from ABC Company:
- ABC Company should warrant that the software will not infringe any intellectual property rights, and
- ABC Company should indemnify (hold harmless) UTSA from any third party claim that software infringes an intellectual property right.
Receiving both these two protections is reasonable and fair. If a company is selling a product, the company should warrant that it has the right to sell it, and it should defend the buyer against claims that state otherwise.
In the above example, assume Widget International Co. claims that the software is actually theirs and charges UTSA with infringing Widget International’s intellectual property rights. If UTSA only has the basic warranty in its contract, UTSA may be able to sue ABC Company for breach, but UTSA will be left to its own devices to defend itself against Widget International. Although UTSA may prevail against both companies, UTSA is fighting two fronts in this instance. If UTSA receives both the warranty and the indemnity, however, UTSA is battling neither. With the indemnity protection, ABC Company must protect and defend UTSA from Widget International’s claims. - Liability and Damages (legal responsibility):
The term “liability” is simply another means of stating “legal responsibility.” Liability is the responsibility or accountability one party has to the other. If one party breaches a contract (fails to perform its contractual obligations), the breaching party is considered to have liability to the other party for the damages incurred by the breach. When establishing a contract, the seller will understandably wish to limit its liability as much as possible. For instance, a seller may attempt to limit its liability for damages to a certain dollar amount. Most sellers will also attempt to eliminate their liability for consequential (indirect) damages. Because UTSA is a Texas State agency, agreeing to either of these clauses is problematic. See Constitutional and Legal Authority
UTSA-Related Clauses
Below are two provisions that are commonly integrated into specific UTSA contracts:
- Confidentiality: Because of the nature of UTSA’s services, many contracts may involve confidential data in some manner. Student-related information, for example, is protected under the Family Education Rights and Privacy Act (FERPA). Similarly, information regarding UTSA’s personnel and intellectual property may also be confidential in nature. Any agreement related to such data or information requires the incorporation of specific confidentiality provisions. On the other hand, many vendor contracts may request non-disclosure or confidentiality warranties from UTSA. Because UTSA is a government agency, however, UTSA can only agree to these provisions to the extent authorized by law, court order, or administrative decree, including but not limited to, the Texas Public Information Act, currently codified in Section 552, Texas Government Code.
- University Marks : The Board of Regents of The University of Texas System owns all rights to the name, logos, and symbols of UTSA (“University Marks”). No displays of any kind or any other advertising may state or imply that UTSA endorses a particular contractor’s products or services. Any use of University Marks by a Contractor must have prior written approval of UTSA, and any use of University Marks for the purpose of a contractor’s direct profit must be pursuant to a license issued by the Collegiate Licensing Company or any successor identified by UTSA.
In certain instances, however, a contractor may be allowed to reference UTSA by name only as a customer of a contractor. Such reference may appear in the contractor’s promotional material or on the contractor’s web site provided that the reference does not state or imply endorsement by UTSA.
Constitutional & Legal Authority
Constitutional & Court-Ordered Limitations
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Sovereign Immunity : The State of Texas is immune from liability and from suit with respect to most causes of action against it under the doctrine of sovereign immunity. Sovereign immunity, unless waived by the legislature, protects the State of Texas, its agencies, and officials from lawsuits for damages, absent legislative consent to sue the State. This means that the State of Texas cannot be sued in its own courts without its legislature's consent. Nevertheless, the State is liable on contracts made for its benefit as if it were a private organization. This means that when a Texas State agency enters into a contract, sovereign immunity from liability may be waived, but sovereign immunity from suit is not. Legislative consent to sue the State of Texas must still be obtained. This doctrine has a direct impact on the authority of State agencies to enter into certain contractual obligations. Under the doctrine of sovereign immunity, for example, a State agency will not be authorized to pay for contractual claims made by a contractor, such as claims related to indemnities or breaches of liability, unless the Texas Legislature by resolution permits a suit against the State. If an Agreement requires UTSA to indemnify or hold harmless another party for or from anything, and it cannot be removed, contact the Contracts Office or the Office of Legal Affairs. For further research, see Whitten, Matthew J., Fiction Becomes Reality: Will Texas Abrogate the Catch-22 of Sovereign Immunity when it Contracts?, Tex. Tech L. Rev. 243 (Winter 2004).
An exception to contractual sovereign immunity is found in the Dispute Resolution statute codified in Texas Government Code, Chapter 2260. This code waives sovereign immunity for certain contractual claims by authorizing a "Contested Case Hearing" with an administrative law judge in the State Office of Administrative Hearings. This Contested Case Hearing is limited to claims of less than $250,000, and specific mediation procedures must be followed prior to filing for such hearing. For further information, see Dispute Resolution Requirements below -
Prohibition Against Agency Debt: Section 49, Article III of the Texas Constitution commands that “no debt shall be created by or on behalf of the State . . . .” An indemnity obligation creates such a “debt” in the constitutional sense because when you indemnify someone, you are financially protecting them from some possible future damage. An indemnity by a State agency, therefore, may be unconstitutional unless at the time of the agreement there are existing funds that have been dedicated to cover the indemnity obligations. Because the cost of any future indemnity claims, if any, are unknown, dedicating such funds is typically not feasible in a government agency with allocated budgets. The critical issue to keep in mind is that any indemnity agreement that is negotiated by a State agency in violation of the law will be unenforceable and void. Furthermore, the State of Texas cannot be held liable for a contractual obligation established by an agent of the State that is in excess of that agent’s authority. For further information, see Texas Attorney General Opinion MW-475.
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Right to Suit: The State of Texas, as a sovereign entity, maintains the right to suit in almost all circumstances. Many agreements include clauses limiting or waiving a contractor’s liability, such as a clause that limits the contractor’s liability to the amount that UTSA has paid for the service. In such cases, an effort should be made to delete the provision. In agreements where the contractor is limiting its liability for consequential damages, or limiting its liability to a dollar figure, you may not succeed in getting the clause deleted. If the other party will not agree to delete the provision, confer with the Contracts Office or the Office of Legal Affairs regarding the issue. You may also wish to inform the contractor that neither UTSA nor the Texas Attorney General has the authority to prejudice the rights of the State to sue or otherwise enforce an agreement containing a limit on or waiver of liability.
Statutorily Required Clauses
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Governing Law (Jurisdiction) and Venue: Because UTSA is a State of Texas Government agency, agreeing to governing clauses from another state or government entity is extremely problematic.
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Eligibility Certification (related to preparing bid or proposal specifications)
- Dispute Resolution
In 1999, the Texas Legislature passed a law requiring a procedure that allows Contractors to resolve certain contract claims against the State or a State agency. This Statute is now codified in Texas Government Code, Chapter 2260. It requires that each State agency place a provision in every contract to which the statute applies, stating that the procedures must be used to try to resolve a dispute arising under the contract. This statute applies to all University contracts except:- Contracts with the federal government
- Interagency Agreements (agreements between agencies of the State of Texas)
- Inter local Agreements (agreements with local governing bodies such as city and county governments, or independent school districts)
- Contracts with foreign and out-of-state governments or agencies thereof
- Contracts under which UTSA is not procuring goods or services (e.g. UTSA is providing the good or service)
For further information, see Dispute Resolution Explained. -
Electronic & Information Resources Accessibility (EIR Provision):
Section 2054.453 of the Texas Government Code establishes requirements for access by disabled persons to electronic and information resources (“EIRs”) procured or developed by Texas state agencies or institutions of higher education.
Section 2054.453 authorizes the Texas Department of Information Resources (“DIR”) to adopt rules concerning how Texas state agencies and institutions of higher education are to develop, procure, maintain, and use EIRs to provide access to individuals with disabilities. The DIR Accessibility Rules that are applicable to institutions of higher education are set forth in Title 1, Chapter 206, Rule §206.70 of the Texas Administrative Code , and in Title 1, Chapter 213, Subchapter C of the Texas Administrative Code.
Further information on the EIR Accessibility requirements -
Standard Addendum to Vendor-Provided Agreements :
The UT System Office of General Counsel maintains a Standard Addendum to service agreements that contains all the clauses discussed above.
Use of Template Agreements
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Template Agreements in the Procurement Process: When UTSA determines the need for a formal agreement, the preferred method is to attach the sample agreement to the procurement solicitation, which is generally a Request for Proposal (RFP). By attaching the sample agreement to the RFP, vendors are provided up front notification of the terms required for completion of the project. If a vendor takes exception to any terms or conditions set forth in the Agreement, the vendor is asked to submit a specific list of the exceptions as part of its response to this RFP. The vendor’s exceptions will be reviewed by UTSA and may result in disqualification of the vendor’s proposal as non-responsive to the RFP. If the vendor’s exceptions do not result in disqualification of its proposal, then UTSA may consider and weigh these exceptions when evaluating the RFP responses.
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Why use Template Agreements? Both UTSA and UT System have developed template agreements that can be utilized for various services. Use of these template agreements can assist in protecting the University and can help to expedite the overall project by providing vendors with prior notification of the terms required for completion of the project.
