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This section gives general information about contracts at University of Wisconsin System institutions. All contracts must be reviewed by a contracts or grants specialist prior to signing. This section is NOT a substitute for review by contracts and grants specialists or by legal counsel. Only individuals who have direct written authorization to sign contracts and agreements on behalf of the Board of Regents may sign contracts and agreements.
Q. What is a contract?
A. A contract is any agreement where there is:
- a mutual exchange of promises
- with reasonable, understandable terms and conditions
- that binds the parties to performance of the responsibilities described.
A contract should contain certain basic information necessary to understand the intent of the parties, such as:
- the names of the parties,
- the dates or term of the agreement,
- a clear description of the responsibilities and obligations of the parties,
- the terms of payment (if applicable),
- a procedure for termination or renewal of the agreement, and
- a signature line for the authorized individuals executing the agreement.
Q. Is a "memo of understanding" or an "agreement" a contract?
A. Yes. The word "contract" is not necessary for an agreement to be a contract. For example, an agreement negotiated by an exchange of letters can be a contract. A document called "memorandum of understanding" is a contract. Contracts will vary in their complexity based on the nature of the goods or services at issue or the monetary value of the contract. If there is any doubt about whether an agreement is a contract, contact the institution's contracts or grants specialist or System or Campus Legal Counsel.
Q. What laws apply to a contract or an agreement?
A. Contract laws vary from state to state. This body of law addresses what constitutes a contract and what remedies are available if a contract is broken or "breached." Contracts and agreements with any UW System institution or unit must be interpreted according to the laws of Wisconsin. If a contract attempts to make the agreement subject to another state's laws, the contract must be changed.
Q. Who can sign a contract for a UW System institution or unit?
A. The UW employee who signs a contract does so on behalf of the Board of Regents of the University of Wisconsin System or one of its institutions. Therefore, only specified UW System or institution administrators have signature authority from the Board of Regents and the UW System to sign contracts. Signature authority is delegated by official policy and action and is conveyed in written documents authorizing named individuals to sign specific types of agreements for the institution and Board.
Only UW System employees who have written delegated authority to sign certain contracts are able to sign those contracts. If there is any doubt, contact your grants or research office, or System or Campus Legal Counsel. Signing without authorization can lead to personal liability not covered by the state's risk fund.
Q. Why would this lead to personal liability?
A. Any contract or agreement that places any obligations on a UW System institution or any of its programs or sub-units is actually entered into on behalf of the Board of Regents of the University of Wisconsin System. The state of Wisconsin is self-insured for risk and damages for actions of its employees, including contractual obligations. However, this risk insurance is available only where the individual who signs the contract or agreement has clear, written delegation of authority to sign the specific type of contract at issue. These individuals have the responsibility to review the agreements for clarity, appropriateness and legality.
Q. What are the most troublesome problems that arise with review of contracts?
A. Many proposed contracts seek to have the University assume all responsibility for any liability arising out of the contract or products of the contract. Wisconsin law does not permit this assumption of liability because the State (and, therefore, the University) is self-insured only for acts and omissions of its own employees and agents. It cannot assume responsibility for acts and omissions of others. Therefore, institutions must delete contractual clauses requiring indemnification of the other party to the contract. Indemnification clauses generally require one party to the contract to reimburse the other party for losses arising out contract. The institution's grants and contracts officers and legal counsel can assist you in redrafting these clauses.
Problems also arise when the contract does not clearly describe the goods or services and the obligations of the parties. The contract itself should be clear and understandable to anyone with reasonable knowledge of the type of goods or services at issue and should protect the institution's interests. Because the "obligations" section of a contract is often closely based on language from the corresponding Request for Proposal (RFP), System or Campus Legal Counsel should also review complex requests for proposals.
The Office of General Counsel provides the following samples of contracts and standard legal forms that can be used in common situations. The forms are provided for the purpose of general guidance only. All university contracts must be processed through the appropriate offices at each institution. Please direct questions about specific contractual issues to the UW System Office of General Counsel or to the legal office at your institution.
Does the UW System, as a state agency, have authority to enter this type of agreement/contract consistent with its mission and with applicable laws, regulations, policies and procedures? Is the subject matter new and innovative, something that has not been done at your institution before? If yes, it may require consideration of additional legal/procedural issues. If in doubt, consult with campus or System Legal Counsel.
Note: the terms contract and agreement are used interchangeably throughout this checklist to mean the same type of document.
Make sure the UW System is identified as a proper party. Use: “Board of Regents of the University of Wisconsin System, University of Wisconsin – Location, Department of ____________,” Not: “Professor Jane Doe.”
- Identify the other party by its corporate/partnership/individual name.
- Provide a point of contact for each party (name, mailing address, e-mail, telephone, and fax
Make certain that the person signing on behalf of the Board of Regents has delegated signature authority for this type of agreement by the written institutional delegation. For example, top administrative officials may have general signature authority for all types of agreements, whether they involve ordinary purchasing, academic/research related agreements or agreements for international cooperation. Other administrators may have limited authority to sign only certain types of agreements – for example, purchases involving certain dollar amounts or specific products. It is important to verify whose signature is required on your specific agreement.
Warning: Signing without the appropriate delegated authority or without obtaining either Board or administrative prior approval, where required, could lead to personal liability for performance of the contract and for damages. See Board of Regent’s Policies on Purchasing Authority: 13-1 through 13-4.
The agreement should indicate that the person signing on behalf of the other party has authority to sign as its representative.
The subject matter of the agreement, whether it involves the purchase of goods and services, academic support, research opportunities, or international cooperation is clear and unambiguous as to what is expected and specific in its description of who does what, when, where, how and the cost involved.
- Any addenda, further describing the subject matter, have to be labeled properly, identified clearly and consistently throughout, and attached to the agreement.
- Does the contract clearly state any and all per diem expenses or travel expenses? Do the provisions comply with System rules?
- Does the contract contain provisions with regard to place, time,and method of payment?
- Obligations set forth in the agreement should be consistent with all laws, regulations and policies.
Effective Date & Termination
The specific (month, day, year) beginning and ending dates are indicated. If the agreement provides for termination at any time prior to end of contract:
- Does the agreement allow both parties to terminate? If not, is there a reason why it doesn’t? Are the circumstances allowing termination clearly identified and applicable to both parties? If not, why not?
- Agreement should require advance notice to be given in writing, identify the contact party who should receive the notice and the address to which it should be sent.
- Does the agreement provide for payment to the institution for services performed by the institution up to the date of termination on a pro rata basis?
- Do you want to include a clause proving that the agreement’s termination does not affect the rights and obligations of the part that accrued before termination? If yes, make sure that the rights and obligations specified are ones that your institution wants to exist beyond the termination of the contract.
Note: The system should reserve the right to cancel any contract in whole or in part without penalty due to non-appropriation of funds or for failure of the contractor to comply with terms. See PRO-E-7. (For illustrative purposes, references to “PRO-_-_” refer to the State Procurement Manual).
Length of Agreement
Do you want the agreement to be renewed or extended? Contracts may be for any term deemed to be in the best interests of the State, but the terms and provisions for renewal or extension must be incorporated in the bid specifications and original contract document. Wis. Stat. §16.75(3). See: PRO-E-10 for guidelines on the length of purchasing contracts.
- If renewal/extension is automatic, does the agreement provide for renewal or extension unless notice of non-renewal/extension is given or some particular non-renewal/extension action is taken by a specific date?
- If renewal/extension is not automatic, it should be accomplished only with the written mutual consent of both parties.
Note: A contract made in excess of funds available must state that its continuance beyond the limits of funds already available is contingent upon appropriation of necessary funds. Wis. Stat. §16.75(3)
Caution: To avoid inadvertent renewal of an agreement because notice of non-renewal was not timely given, consider a clause that provides for termination unless one or both parties (if only one, it should be the System) give notice of intent to renew.
Are events that constitute a default/material breach in performance listed? If they are, they should be clear and specific and the consequences on the rights and obligations of the parties identified. Is there a specific method for providing notice of default/breach? Is there an opportunity to cure? What are the specifics? What time period is allowed for cure?
Binding arbitration clauses should be stricken. Non-binding arbitration clauses may be permissible. See State of Wisconsin v. P.G. Miron Construction Co., 181 Wis.2d 1045, 512 N.W.2d 499. Consult campus or System Legal Counsel if you are unsuccessful in striking a binding provision.
Choice of Laws
The contract should contain language which makes Wisconsin law apply. If the other party refuses to agree to this, suggest striking the entire clause. Consult campus or System Legal Counsel if there are any questions. See PRO-E-7, Standard Terms and Conditions.
Language should be included requiring claims to be brought in a Wisconsin court of competent jurisdiction. Consult campus or System Legal Counsel if the other party refuses to agree to this provision.
Required Non-Discrimination Clause
State contracts must contain a provision prohibiting the contractor from discriminating against its employees or applicants for employment on the basis of age, race, religion, color, handicap, sex, physical condition, developmental disability, sexual orientation, or national origin. Contractors of a certain size are required to have an affirmative action plan. See your grants or contracts specialist if you have any questions. Wis. Stat. §16.765 (1), (2); PRO-E-7, Standard Terms and Conditions.
Required Appropriations Clause
If the contract extends beyond the current appropriation period, it must contain language making continuation of the agreement contingent upon availability of appropriated funds. Wis. Stat. §16.75 (3); PRO- E-10. See contract specialist. This provision applies only when the system is purchasing goods or services not when it is being paid for something.
Confidentiality and Non-Disclosure Clauses
The availability of information concerning the contract is subject to disclosure under the open records statute. The existence of the agreement itself can never be confidential. Any confidentiality clause should be tailored to reflect this requirement and drafted narrowly to protect any proprietary interests or trade secrets. PRO-D-23 Consult with campus or System Legal Counsel if you have questions.
Indemnification – By state law, the System cannot agree to indemnify from liability the other party to the agreement. This clause must be eliminated. See Risk Management Policy and Procedure Manual, Part 4.
Hold Harmless – The System can agree to hold harmless the other party but only to the extent that any of the liability, loss, damages, etc. arises out of the negligent act or omission of any employee, officer or agent of the System while acting in the scope of their employment. Risk Management Policy and Procedure Manual, Part 4. Check with campus or System Legal Counsel.
Contracts to Limit Liability – When the System desires to use a contract to limit its own liability when outside parties are using System facilities, contact Office of Risk Management.
A Certificate of Insurance may be required of the vendor when the vendor’s services bring an inherent risk of liability to the System. See PRO-D-34. Contact Office of Risk Management.
If a vendor requires a System Certificate of Coverage, contact the risk manager at your institution. See Risk Management Policy and Procedure Manual, Part 4.
The State Self-Funded Liability Program protects employees from liability arising out of their negligent acts or omissions if committed while acting within the scope of their authority. See Wis.Stat. § 895.46. Contact Office of Risk Management.
Strike any clause which suggests that the System agrees to be sued for specific performance. This remedy is a form of equitable relief in which a court orders a party to a contract to perform what that party has promised to perform. The State cannot be sued for specific performance because it is prohibited by Article IV, § 27 of the. See Erikson Oil Products v. DOT, 184 Wis.2d 36, 516 N.W.2d 755 (Ct. App. 1994).
Strike any clause which suggests that the prevailing party shall be entitled to recover court costs and attorney’s fees in the event of litigation. The laws that apply to the type of lawsuit that is brought will determine whether a party can recover attorney’s fees and costs. If a party refuses to strike this clause, consult with campus or System Legal Counsel.
Consult campus or System Legal Counsel if other remedies are presented.
Sureties may be required from contractors when it is in the best interests of the State. See Wis. Stat.§16.75(5) and for guidance. Certain nonresident entertainers and public speakers are required to post a bond with the Department of Revenue for payment of income taxes. A clause addressing this requirement should be included in every public speaker/ entertainment contract. Contact campus and System Legal Counsel.
Intellectual Property Clause
For guidance on various intellectual property issues, consult with campus and System Legal Counsel. Review the following: UW System Financial and Administrative Policies: SYS 190, SYS 191, and SYS 346.
Don’t be fooled by the name of a document. Whether a document is called an AGREEMENT, A LETTER OF AGREEMENT, A MEMORANDUM OF UNDERSTANDING, A MEMORANDUM OF AGREEMENT, A LETTER OF UNDERSTANDING, A PURCHASE ORDER or any other caption, if it creates legal obligations on the part of the UW System and another party, it is a binding CONTRACT.