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What is “Committing” the University?
o Usually, entering into contract or agreement
o “Approving” the purchase of goods or services in PeopleSoft
o Can be very broad, e.g., agreeing to allow University marks to be used
Contracting “101” o Exchange of promises that the law will
enforce n A promise in exchange for something of value
o Writing is not required n Oral contracts
o Agency
Agency “101”
o Dean = Agent Pepperdine = Principal
o An agent’s acts commit the principal n Actual authority: Expressly given by Pepperdine n Ostensible authority: “That authority that Pepperdine causes or allows a third
person to believe the Dean possesses”
o The principal is committed to third parties who have relied on agent’s authority
o An agent who acts without authority or in excess of authority may be held liable to the principal
So, What Happens if You Commit the University Without Authority….
o University likely required to perform its obligations
o University may view event as outside of job responsibilities and: n Hold employee personally
liable
Who Can Commit the University? o Execution of Documents Policy
n Any amount: Any two of the chair, vice chair, secretary and assistant secretary of the Board of Regents
n $2,000,000+: Any two Authorized Officers involving: o Transactions authorized by Regents, o Gift agreements if approved by Gift Review Committee, o Debt repayments, fund transfers, draw-downs on lines-of-credit, or o Investment and Banking transactions
n $50,000 - $2,000,000: Any two Authorized Officers o Unless is a “Routine and Recurring Transaction” (e.g., income tax withholding,
medical insurance, utilities) where a single Authorized Officer is sufficient n $100,000: President n $50,000: Any Authorized Officer n $25,000: Any employee so delegated by the Exec. V.P. or CFO
o PeopleSoft “Approvers”
Golden Rules (continued ) Rule Two
Determine whether the contract should be reviewed by
General Counsel o Is the contract amount over $50,000? o Does the contract involve a high or unusual risk?
That Begs the Question…. Question: What if the contract amount is under
$50,000 but I’ve never negotiated a contract before?
o Answer: Review General Counsel’s “Tips on Contracts Under $50,000”
…and More Questions…
Question: But how can I assess whether the contract presents a high or unusual risk?
GREAT QUESTION!!! Answer: Analyze the risk, or in the alternative
consider the question, “does this seem like a good idea?”
Example
o Scenario One: University enters into a large contract to buy cases of copy paper on a recurring basis.
Analysis
o Nature of Risk: Although the contract amount is large and the University buys large quantities of copy paper on a recurring basis, a contract for the sale of paper poses a very low financial, reputational or liability risk to the University.
o Likelihood of Occurrence: The likelihood that someone would be harmed with respect to a contract for the purchase of copy paper is fairly low.
o Risk: LOW
Example
o Scenario Two: University enters into contract for rock climbing wall at University-sponsored event for $1,200.
Analysis o Nature of Risk: Although the contract
amount is quite small, and the sponsoring of a rock climbing wall is a unique or very infrequent event, this is a high-risk event in that it combines potentially inexperienced or distracted climbers with potentially negligently maintained equipment and/or inexperienced or poorly-trained staff. There is a possibility of severe bodily injury or death resulting from this type of activity.
o Likelihood of Occurrence: The risk of
falling is high with respect to such an inherently risky activity.
o Risk: HIGH
Analysis o Nature of Risk: The contract
amount is large, and ordinarily the replacement of telephone switches seems fairly routine and unlikely to cause harm. However, failure of replacement telephone switches would cripple the University’s business operations, resulting in a huge financial risk to the University.
o Likelihood of Occurrence: The risk of failure of replacement telephone switches is low.
o Risk: HIGH X
Managing Risk o Identify exposures creating risk o Quantify/qualify risk o Conduct Risk Analysis
n Nature of Risk x Likelihood of Occurrence = RISK
o Mitigate Risk n Reduce Likelihood of Occurrence n Minimize Impact of Occurrence
Golden Rules (continued ) Rule Three
Information, Information, Information: How the
Contract Review Summary Helps the Office of the General Counsel
Contractual Transfer of Risk
o Indemnification o Insurance o Limitation of Liability and Disclaimers o Termination for Convenience
Golden Rules (continued ) Rule Four
Take the comments received from the Office of the General Counsel to
negotiate a better contract.
Negotiation of Contracts
o University employees may engage in the negotiation of any contract only after obtaining the express approval of a University officer, agent, or employee.
o Under no circumstances should any employee give verbal or
written assurances or commitments on behalf of the University without being so authorized.
Written Final Approval Required
All employees negotiating contracts on behalf of the University shall inform the other party that no terms are final until approved in writing by a University officer, agent, or employee who is authorized to do so.
Common Questions Question: Who keeps the finalized contract? Answer: Each department is responsible for
maintaining any executed contracts.
Common Questions Question: Certain contracts are recurring contracts. These are contracts where the University has a good relationship with the same vendor. If nothing has changed with the contract terms, should I get that contract reviewed? Answer: YES! Before renewal, take the opportunity to propose adjustments in the terms as necessary and communicate with the General Counsel’s Office regarding potential new requirements.
Common Questions Question: Which contract should I choose? Answer: There are several options, including
1. Standard Consultant Services Agreement 2. Construction Contracts 3. Purchase Order Terms & Conditions 4. Other Party’s Contract 5. Special Contracts:
o In-N-Out
Contracting Protocol Take-Aways 1) Express Authority. 2) Negotiation of Contracts. 3) Written Final Approval Required. 4) Written Contract Required For Contracts
over $49,999. 5) General Counsel Review. 6) Contract Questions.
Cer$ficates of Insurance & Indemnifica$on:
Protec$ng the University’s Assets
Lauren W. Cosen$no Associate Vice President
Human Resources, Insurance & Risk
Indemnifica*on • An indemnifica$on clause in a contract iden$fies ahead of $me, who is responsible for what.
• One Party agrees to be financially responsible for specified types of damages.
• Creates incen$ves for the par$es involved to be responsible!
Why does Pepperdine require outside par$es to have insurance?
• The other party’s insurance will pay the indemnifica$on. Pepperdine wants this!
• We do not want to have the University’s insurance respond.
Insurance Requirements
Cer*ficates of Insurance What are they good for?
• They serve as evidence of coverage.
• They will disclose that the policy(ies) includes protec$on for the indemnifica$on.
• Acord format is the standard format u$lized by the industry.
Cer*ficates of Insurance • During the term of the agreement, including extensions, “Consultant” must furnish cer$ficates of insurance to evidence the required insurance is maintained.
• Failure to submit the cer$ficate 15 days before entering University’s premises cons$tutes a material breach of the agreement.
Pepperdine’s Consultant Services Agreement:
• “Consultant” must maintain specified insurance during the term of the agreement
• Insurance limits to look for:
• Per Occurrence – this is the most that the policy will pay as the result of a par$cular incident/claim
• Aggregate -‐ the "Aggregate Limit" is the most the policy will pay as a result of all occurrences during the policy term (usually one year)
Insurance Requirements
Pepperdine’s Consultant Services Agreement:
• Commercial General Liability: $1,000,000 • Personal injury • Independent contractors • Contractual • Par$cipants • Physical/sexual abuse, harassment, and molesta$on
• Workers’ Compensa$on (statutory limit): $1,000,000
• Business Auto Liability: $1,000,000
Insurance Requirements
• A.M. Best’s ra$ng of A-‐ or befer • Add the University as an addi$onal insured on the actual cer$ficate of insurance
• State that they cannot be canceled without 30 days no$ce
• Documenta$on must be received prior to the effec$ve date of the contract
Insurance Requirements Pepperdine’s Consultant Services Agreement:
Contrac*ng at Pepperdine
• Process of contrac$ng
• Signing authority
• Review with Supervisor • Contracts over $50,000 or those that may present a unique risk should be reviewed by the General Counsel Office
What happens when the outside party will not or cannot agree?
• Duty to manage University resources • Who has the leverage? • Business decisions
• Benefits: how important? • Poten$al costs: safety, assets, and University reputa$on
Troubleshoo*ng