1. What is a contract?
A contract is an agreement between two or more persons (or entities) that creates an obligation to do or not to do a particular thing. Its essential components are competent parties (persons or entities legally capable of contracting), subject matter (the purpose of the contract), a legal consideration (the inducement to contract, usually money or something of value, but also including mere promises to perform something or refrain from doing something), mutuality of agreement (all parties must voluntarily enter the contract) and mutuality of obligation (all parties are obligated to do something or not to do something they otherwise have a right to do).
Labels do not control whether a contract exists or not. The following, which are not meant to be all-inclusive, are all contracts if they constitute an agreement between two or more persons that creates an obligation to do or not to do a particular thing:
a contract;
an agreement;
a lease;
a rental agreement;
a letter or memorandum of intent;
a letter or memorandum of agreement;
a letter or memorandum of understanding;
an employee separation agreement;
a facility use agreement;
an education affiliation agreement;
a purchase order;
a grant;
a grant agreement.
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2. Why must the procedures stated be followed?
A contractual obligation is a legal obligation. Signing a contract is a very serious step which, depending on the terms of the contract, could put the NSHE in a position of considerable liability sometimes political, sometimes from a public relations standpoint, but most often of a financial nature. The policies contained have been developed in order to try to limit financial liability from lawsuits that might arise from improperly written contracts. The policies established serve important interests of the board of regents, and it is essential that they be followed by NSHE officers and employees.
3. Are student government contracts governed by the policies?
Yes. Student governments are an integral part of the NSHE and the institutions in which they are established and, therefore, contracts they may enter into are subject to the contract policies established by the board of regents, the chancellor and the presidents of each institution.
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4. Are contracts with performing artists governed by the policies?
Yes. Contracts with performing artists are contracts with the NSHE and, therefore, are subject to the same policies and procedures established by the board of regents, the chancellor and the presidents of each institution. If a standard form contract is used that has been approved by the general counsel's office, it may be approved at the institutional level.
5. Are internal contractual agreements between NSHE entities subject to the policies?
As the NSHE is a single legal entity, the need for oversight regarding agreements or understandings between units within the system is lessened in comparison to contractual agreements between the NSHE and external legal entities. Accordingly, internal agreements between units within the NSHE do not require the chancellor's signature unless otherwise required by board of regents' policies. These agreements, nevertheless, are subject to any policies that have been adopted at the institution level for the review and approval of contracts. A standard form agreement may be found in form link for general use.
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6. Why should I have to send my contract to the Chancellor's Office at all? Why can't the president sign it?
As the Board of Regents Bylaws state (Article III, Section 1), "The exclusive control and administration of the Nevada System of Higher Education is vested by the Constitution of the State in an elected Board of Regents." One corollary of this is that the contracting party for any NSHE contract is the Board of Regents -- not the universities, community colleges or state colleges, Desert Research Institute; or schools, colleges, centers, departments, or any other administrative sub-unit of an institution of the NSHE."
To be valid, the agreement should state that it is entered into by the BOARD OF REGENTS OF THE Nevada System of Higher Education, on behalf of Western Nevada College, (followed by specific sub-unit of the institution, if necessary).
Similarly, the signature block should read:
THE BOARD OF REGENTS OF THE Nevada System of Higher Education, on behalf of Western Nevada Community College, (followed by specific sub-unit of the institution, if necessary).
By: ______________________________
Philip M. Ringle, Ph.D.
President
By: ______________________________
Jane A. Nichols, Ed.D.
Chancellor
The chancellor signs the contract as the contracting officer for the Nevada System of Higher Education. The chancellor's authority is derived from the Board of Regents Bylaws, Article VII, Section 3, which states that:
"The Chancellor is the Chief Executive Officer and Treasurer of the Nevada System of Higher Education, and is responsible for the financial management and coordination of the administration of the Nevada System of Higher Education and for the implementation of the Board's policies. The Chancellor may delegate any of the duties of the office unless expressly prohibited by Board policy.
"Duties are prescribed by the Board of Regents and include the following:
To serve as contracting officer for the Nevada System of Higher Education and to execute all contracts and other instruments on behalf of the University unless authority has been expressly retained by the Board of Regents or delegated elsewhere."
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7. Does the president of a NSHE institution have to review a contract before it is sent to the chancellor for signature?
Yes. It is the policy of the chancellor that any contract sent to the chancellor for signature must first be recommended by the president of the appropriate institution or the president's designee. The purpose of this policy is to ensure that no institution will commit the board of regents or the institution to a binding contract without the knowledge of the institution's chief administrative officer.
8. If a contract has been sent to the chancellor for signature and the chancellor is absent, is there a way for the contract to be signed anyway?
Yes. During an absence from the office, the chancellor has delegated signature authority as follows:
1. Vice chancellor for finance and administration;
2. Vice chancellor for academic and student affairs; and
3. General counsel.
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9. What process must be followed in sending a contract to the chancellor for approval?
All contracts submitted for approval must contain the following:
1. Submittal to the finance and administrative services office for review.
2. Signature block for the chancellor.
3. Flags on all pages requiring the chancellor's signature.
4. One extra, flagged copy marked "chancellor's copy" or "system copy".
5. An addressed return envelope (with postage if campus mail is not used)
10. How much time should generally be provided for review and signature by the chancellor?
Contract officers should normally anticipate a two-week time period for processing at the Reno system office. When a contract is received by the chancellor's office, it undergoes review by the general counsel prior to signature by the chancellor. Questions about the status of a particular contract should be directed to the finance and administrative services Office.
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11. Which contracts be sent to the chancellor for signature?
Contracts that must always be sent to the chancellor for signature are:
1. All contracts that must be approved by the board of regents by law. These include, but are not necessarily limited to:
A. the sale or purchase of real property or the long-term lease of real property owned by the NSHE, including easements over real property (NRS 396.430). "Long-term" is defined as in excess of four years.
NOTE A: The lease of NSHE property for specific, one-time events need not be approved by the board of regents and is excluded from the requirements of this paragraph, but may otherwise be subject to the requirements set forth later in this memorandum.
NOTE B: Contracts as described in (a) above must be placed on a board of regents' agenda for approval.
2. All contracts with an open-ended or indefinite term.
3. All contracts that provide for the hiring of outside attorneys for legal services.
4. Except for standard form federal grants and contracts and for NSHE purchase orders, all contracts:
A. which require consideration (cash, property, or services) valued in excess of four hundred thousand dollars ($400,000), calculated by adding the total cumulative payments, delivery, or performance over the entire term of the contract, (For example: a lease for $15,000 per month for a three-year term would cumulatively total $540,000 and, therefore, would require the chancellor's signature) OR
B. which are for terms in excess of four years or which provide the right to renew for terms that exceed four years in the aggregate.
NOTE: The presence of either condition is enough to require that the contract be signed by the chancellor.
5. All contracts which, in the judgment of the president of a NSHE institution, have such a serious political, social, or financial impact on the NSHE or the public that the board of regents' or the chancellor's review is necessary.
6. All other contracts for which signature authority has not been delegated by the chancellor as provided in this memorandum.
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12. What contracts can be signed by the president?
The Board of Regents' Bylaws authorize the chancellor to delegate certain contract-related responsibilities.
The chancellor hereby delegates signature authority for the following contracts to the presidents of the NSHE institutions or to the president's designee.
1. Consideration of four hundred thousand dollars ($400,000) or less and terms of four years or less.
All contracts (including interlocal cooperative agreements, interlocal contracts, and standard form contracts):
(a) which require consideration (cash, property or services) valued at four hundred thousand dollars ($400,000) or less, calculated by adding the total cumulative payments, delivery or performance over the entire term of the contract (For example, a lease for $10,000 per month for a three-year term would cumulatively total $360,000 and, in conjunction with the fact that the lease is for less than four years, would therefore be a contract that could be signed by the president or designee.) AND
(b) which are for terms of four years or less or which provide the right to renew for terms that do not exceed four years in the aggregate.
NOTE: Both conditions must be present before the contract can be signed at the institutional level.
2. Cost Overruns and Change Orders
Cost overruns or change orders which in the aggregate do not exceed 10 percent of the base contract amount.
3. Standard Form Federal Grants and Contracts
All standard form federal grant applications, grants, contracts, modifications, and release forms.
NOTE: Sub-contracts under approved federal grants and contracts are sometimes entered into with third parties to perform portions of the work or to provide materials. Because sub-contracts are executed at the institution level and are not subject to review and approval by the chancellor, it is the institution's responsibility to maintain proper administrative oversight over the terms of any sub-contract.
4. Education Affiliation Agreement
All education affiliation agreements that do not exceed $400,000 and/or four years in duration. All education affiliation agreements must have insurance and indemnification clauses that have been approved by the NSHE risk manager and general counsel. The insurance and indemnification clauses contained in the NSHE standard form Education Affiliation Agreements are approved for use by all institutions and units.
5. Purchase Orders Issued by NSHE
All purchase orders in which the purchase contract is awarded to the "lowest responsive and responsible bidder," in accordance with the purchasing policy set forth in Title 4, Chapter 10, of the Board of Regents Handbook, are delegated to the vice president for finance at the appropriate institution or his or her designee. Exceptions to the established purchasing policy must be presented to the board of regents for approval.
6. Intra-Institutional Contracts or Agreements
Agreements between NSHE entities that do not exceed $400,000 and/or four years in duration. These agreements are, however, subject to any policies that have been adopted at the institutional level pertaining to the review and approval of contracts/agreements.
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13. How does the president delegate his or her signature authority to another person?
The president may delegate his or her signature authority on contracts, providing that such delegation is made in writing and is specific to a position rather than to a person. A copy of the written delegation of signature authority shall be kept by the institution in a secure and accessible location or established archive for inspection and audit purposes.
In the case of system units housed on NSHE campuses - such as system computing services - the delegation of signature authority for applicable contract documents shall be delegated by the chancellor to the appropriate vice chancellor in charge of the system unit.
14. What is the policy on delegated signature authority when standard form contract are used?
If a NSHE standard form contract is used and the consideration for the contract is for a value of four hundred thousand dollars ($400,000) or less AND for a contract term of four years or less, the authority to sign the contract is delegated to the president or the president's designee. However, if the consideration of the NSHE standard form contract is for a value in excess for four hundred thousand dollars ($400,000) OR a contract term in excess of four years, it must be signed by the chancellor.
15. If an institution's president or the president's designee is absent, is it possible to have another person in the institution sign a contract which has been otherwise delegated for signature authority to the president or the president's designee?
In cases where the person who has been delegated signature authority for a particular type of contract may be absent from the institution, he or she may re-delegate signature authority to another person for the period of his or her absence. Such re-delegation must be in writing and designate a specific timeframe.
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16. If there is any doubt as to who has authority to sign a contract, what should be done?
When there is doubt as to who has the authority to sign a contract, the contract should be sent through appropriate channels to the president for transmittal to the chancellor for signature.
17. Who must sign modifications to existing contract?
If the contract contains language specifically permitting authority to modify a contract, the original signatory may sign the modification. If the original signatory is not available, then the contract amendment may be signed by another person to whom such signature authority has been properly delegated. A written contract can only be amended by amendments, which are signed by all parities to the original contract. However, if the modifications raise the contract amount in excess of $400,000 and/or extend the term of the contract to more than four years, the contract must be forward to the chancellor for signature.
18. Who is authorized to sign notices of termination of behalf of the system for contracts that contain a provision that they are cancelable upon written notice to the other party?
The person who was authorized in the original contract to send or receive notices. If no one is so designated, then the person who signed the contract on behalf of the NSHE may sign a notice of termination.
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19. Must employee separation agreements be sent to the chancellor for review?
Yes. The chancellor and general counsel must ensure that such agreements have the proper release language contained in them before they are executed.
20. What is the effect of a contract that is signed without the proper signature authority?
Any contract which is signed in violation of the policies stated is void and of no effect. Any person who signs a contract in violation of these policies is subject to discipline up to and including termination and any other available remedies at law.
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21. What are "hold harmless" clauses and why are they potentially dangerous?
Many private contractors or state or local governmental agencies routinely insert
a clause in their contracts that is worded something like this:
"The University of Nevada agrees to indemnify and hold harmless the John Doe Company (or the City of Gotham) from any and all claims and losses arising from the performance of this contract."
However, the state's self-insurance program, to which the NSHE belongs, protects only against acts or omissions of NSHE employees that occur within the scope of public duty or employment and that are performed or omitted in good faith. By agreeing to a clause like the one above, the NSHE would be agreeing to defend the John Doe Company or the City of Gotham from any and all claims and losses, whether or not caused by any fault of any NSHE employee. In effect, by signing such a clause, the NSHE would become the insurer of the other contractor. This is not permitted by the State of Nevada.
In addition, under Nevada law (NRS 41.035), the NSHE's liability for personal or property injury is fifty thousand dollars ($50,000) per cause of action. By signing such a hold-harmless clause without reference to this limitation, the NSHE may open itself up to the argument that it has waived its fifty thousand dollar ($50,000) limitation on personal or property damage claims.
Therefore, if the other contracting party insists upon a hold-harmless clause, the statement that is acceptable to the NSHE and the State of Nevada is one that states:
"To the extent limited in accordance with NRS 41.0305 to NRS 41.039, (Institution) shall indemnify, defend, and hold harmless (name of the other party) from and against any and all liabilities, claims, losses, lawsuits, judgments, and/or expenses, including attorney fees, arising either directly or indirectly from any act or failure to act by (Institution) or any of its officers or employees, which may occur during or which may arise out of the performance of this Agreement. (Institution) will assert the defense of sovereign immunity as appropriate in all cases, including malpractice and indemnity action. (Institution's) indemnity obligation for actions sounding tort is limited in accordance with the provisions of NRS 41.035 to $50,000 per cause of action."
It is recognized that contracts that are written by the other party may not have a "hold-harmless" clause that follows exactly the required form. Provided such hold-harmless clauses state that they are conditioned "To the extent limited in accordance with NRS 41.0305 to NRS 41.039," and provided they are limited to the acts or omissions in the course and scope of the public duties of the NSHE and its officers, employees or agents, such language is acceptable. If a hold-harmless clause does not have this language, then it must be added before the contract is signed, and a language to the contrary stricken.
Except as provided below, no other form of hold-harmless clause than the statement provided above shall be authorized or accepted by the NSHE. Contracts containing hold-harmless clauses using language other than that stated above will not be approved or signed by the chancellor or the chancellor's designee, nor should such other hold-harmless clauses be placed in the contracts signed at the institutional level except as provided herein. Other persons who have been delegated contract signature authority under this memorandum are not authorized to sign any contracts containing a hold-harmless clause that is not in the form stated or as otherwise approved as provided below: The standard form agreements have indemnity language that is approved for use.
There will be no exceptions to this policy except as stated and except as specifically authorized by the general counsel for good cause shown.
NOTE: It is not the policy of the NSHE to volunteer to put a hold-harmless clause in a contract that benefits the other party to the contract. Only where the other party requests such a clause should it be included. Also, whenever a hold-harmless clause is required by the other party, then the NSHE must insist on a mutual hold-harmless clause that benefits the NSHE, its officers and employees. Such a mutual hold-harmless clause should be in the following form:
(Contracting party) shall indemnify, defend, and hold harmless NSHE, its officers, employees, and agents from and against any and all liabilities, claims, losses, costs or expenses to the person or property of another, lawsuits, judgments, and/or expenses, including attorney fees, arising either directly or indirectly from any act or failure to act by (contracting party) or any of its officers or employees, which may occur during or which may arise out of the performance of this Agreement."
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22. How does insurance present a problem for NSHE contracts?
Unless an institution is prepared to pay expensive commercial insurance coverage, a contract provision that requires the NSHE to have commercial general, business automobile or professional liability insurance (other than medical malpractice) is not possible, as the NSHE is self-insured for these coverages. The contractor should be informed of this and, if needed, a certificate of self-insurance may be supplied by the NSHE Risk Manager. Contract terms that require the NSHE to have commercial general and business automobile liability insurance must either be deleted from NSHE contracts or, alternatively, the following language may be added in lieu of such provisions:
"Western Nevada College is self-insured in accordance with the limitations of NRS 41.0305 to NRS 41.039."
Education Affiliation Agreements The insurance and indemnification clauses in all education affiliation agreements must be approved by the NSHE risk manager and the general counsel. The language contained in the NSHE standard form Education Affiliation Agreements is approved for use by all institutions and units. NOTE: The language for medical school and allied health affiliation agreements is not the same. Be sure the correct insurance or indemnification clauses are selected.
Independent Contractor Agreements The NSHE standard form Contract for Services of Independent Contractor includes an insurance schedule setting forth various types of insurance that may be required of contractors with the NSHE. The insurance requirements for workers' compensation, commercial general and business automobile liability are mandatory in all independent contractor agreements. Whether other insurance should be required will depend on the subject matter and circumstances of each contract. Contact the finance and administrative services office with any questions regarding insurance provisions.
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23. What is the NSHE policy on determining which state's law applies to a contract?
Contracts frequently provide that a contract is subject to the law of a particular state. It is the NSHE's policy that if a contract is to be performed in Nevada, the contract must be subject to Nevada law. If a contract is to be performed outside the State of Nevada, the NSHE would still prefer that Nevada law apply to the contract, but has no objection if the law of the state where the contract is to be performed is applicable to the contract. The following language is recommended for choice of law:
The parties agree that the laws of the State of Nevada shall govern the validity, construction, interpretation, and effect of this contract. Any and all disputes arising out of or in connection with the contract shall be litigated only in the Second Judicial District Court in and for the County of Washoe, State of Nevada, and (name of contractor) hereby expressly consents to the jurisdiction of the said court.
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24. Is there special language that must be included in nuclear waste repository research grants or contracts?
Yes. The location of a nuclear waste repository in Nevada is a highly controversial and politically charged issue. A number of highly placed public officials, as well as news media organizations, have criticized the NSHE for entering into these contracts. The board of regents, however, has bly supported the academic freedom of the NSHE institutions and faculty to contract to perform research in this field.
The matter is complicated by the opinion of the Nevada attorney general that by contracting with the United States government or its contractors for research on the nuclear waste repository site, the NSHE, as an instrumentality of the State of Nevada, may indirectly waive the State of Nevada's objections to the location of a nuclear waste repository in Nevada. Although the NSHE general counsel is not persuaded by this argument, nevertheless, as a matter of prudence, the issue must be addressed in the NSHE's contracts.
Therefore, the following language must be included in every nuclear waste repository research contract (or grant) entered into between the NSHE and the United States government or a contractor of the United States government:
"The parties to this contract expressly agree that neither the making or entering into of this contract, nor the terms, conditions or performance of this contract, shall be considered by the United States, the State of Nevada or any of their agencies, officers, employees or agents, either expressly or impliedly, directly or indirectly, or in any way whatsoever, as constituting the consent, permission or agreement of the State of Nevada or its legislature, agencies, officers, employees and agents to the location, establishment or creation of a nuclear waste repository site in Nevada."
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25. Is there any provision which must be included in an open-ended or indefinite term contract?
Yes. Every open-ended or indefinite term contract must contain a mutual no-cause cancellation or termination clause. An appropriate notification period should be included as part of the cancellation or termination clause.
It is also recommended that NSHE institutions periodically review open-ended or indefinite term contracts on a regular basis to determine if the continuation or the cancellation of the contract is in order.
26. Is there special language that must be included in the event of non-appropriation of funds?
Yes. Every contract with a term beyond the current biennial budget cycle should have a clause allowing termination without penalties in the event the legislature fails to provide funding for the contract obligation. The following language is recommended:
"In the event no funds or insufficient funds are appropriated and budgeted or are otherwise unavailable in any fiscal period for payments due under this Agreement, then this Agreement shall terminate on the last day of the fiscal period for which appropriations were received without penalty or expense to (institution) and any kind whatever."
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27. What is "HIPPA"?
"HIPPA" is an acronym for the federal Health Insurance Portability and Accountability Act of 1996. Contracts with certain health care entities or providers must contain provisions to ensure compliance with HIPPA healthcare privacy requirements. Contact the finance and administrative services office.
28. What are some of the other frequent problems that arise with NSHE contracts?
Sometimes a contract is simply ambiguous in its terms, indefinite as to time of performance, fails to state the consideration, fails to identify the parties or fails in some other necessary element. No contract may be signed without resolving these matters.
Contract review exists for the purpose of protecting the NSHE and its employees, not for the purpose of delaying a project or blocking payment for work already done. In this connection, it should be emphasized that work on a project should not be begin prior to the signing of a contract for that work.
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29. Can work begin on a project before a contract is formally signed?
No, except with prior approval as discussed below, because it is possible that the beginning of work on a proposed contract would be interpreted by a court as constituting acceptance of the contract and, thus, binding upon the NSHE, especially if the other party was aware that work was proceeding. Only the chancellor, however, or the chancellor's designee in the specific instances defined in this policy document, has the authority to enter into contracts on behalf of the system. Therefore, such de facto acceptance of the offer of the other contracting party may place the employee who thus accepts the offer in the position of being in violation of the Board of Regents Bylaws and policies.
There is, in addition, the risk that the other party did not understand the verbal agreement exactly as the NSHE negotiator did and that, in the absence of a written instrument, disputes might arise as to some aspect of the work to be performed. Anyone who performs work without a valid contract runs the risk of not being paid.
The only exception to this policy is in specific instances where it is the best interests of the institution to initiate the work before the contract is fully executed and where the institution has adopted a procedure for approval of the commencement of work before the contract is fully executed. In such cases, the institution must accept full financial responsibility should the contract not be executed or should payment from the outside source be denied.
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30. Where must copies of NSHE contracts be filed?
Copies of all contracts entered into by a NSHE institution pursuant to a delegation of authority must be kept in a secure and accessible location at the institution in question or at an established archive. In addition, a copy of any contract signed by the chancellor shall be kept at the chancellor's office or at an established archive.
31. How many copies must be made of each contract?
Institutions sending a contract to the chancellor for signature must include one extra copy of the contract for the chancellor's office files that is marked "chancellor's copy" or "system copy." Both copies must contain flags on all pages requiring the chancellor's signature.
32. How long must copies of NSHE contracts be kept?
Copies of NSHE contracts must be kept for a period of at least six years after the expiration of the contract.
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