Contract Review and Approval Process

Legal Concerns: Follow-up From the Legal Information Session *

As representatives of the University’s Office of General Counsel (OGC), we recently spoke at information sessions hosted by Purchasing Resource Services on both the Evanston and Chicago campuses regarding the contract review and approval process here at the University. This article provides a brief discussion of the major topics that were addressed at these information sessions, which may be of interest to many members of the University community.

We understand that numerous faculty and staff throughout the University regularly receive proposed contracts from various educational institutions, outside agencies, vendors, and other third parties. The first question for many faculty and staff may be, "How do I go about getting this contract signed?" In short, except in the case of Northwestern form contracts previously approved by OGC and sponsored research agreements that are reviewed by the Office for Research and Sponsored Programs, most contracts to which the University (or any college, school, department or other subdivision of the University) is a party, should be reviewed by the Office of General Counsel or, under certain circumstances, by University Services, and signed by a University officer – the President, Provost or a Vice President – or a University officer’s duly authorized designee.

Now, let’s turn to some of the practical questions that we addressed regarding the process for getting contracts that you need reviewed, approved and signed by the appropriate University personnel.

Q) What should you do if you have a contract that your school or department would like to enter into?

A) First, you should determine whether or not a University form contract exists. Second, check to see if the University has a group of preferred vendors or contractors by contacting University Services. Finally, you can consult Purchasing Resource Services’ website to learn about University form contracts for NUCOMP, NUMAINT and Genesis Technologies. We recommend using form contracts whenever possible in order to provide a cost savings to the University and ensure that contracts contain terms acceptable to the University. If a University form contract does not exist, then the proposed contract should be sent to the OGC for review. Due to the number of contracts that the OGC reviews, we typically require two or three weeks to review a contract.

Q) What happens after you send the contract to the Office of General Counsel?

A) Our office reviews each contract, focusing on the aspects of each agreement that may be unfavorable for the University from a legal standpoint. Examples of provisions that we often seek tomodify or delete include those that call for the automatic renewal of an agreement, those that donot allow the University to terminate the agreement under any circumstances, and those that callfor a long contract term (e.g., more than 2-3 years). For all contracts, the faculty or staff who want the University to enter into a contract should read the contract carefully and understand how it will operate from a business standpoint. After we review a contract, we return it to the appropriate faculty member or staff person with our comments and questions. It is then up to the faculty member or staff person to negotiate the terms of the contract in consultation with our office and, hopefully, reach agreement regarding the final terms of the contract. If the other party gets its attorney directly involved in the negotiations, then our office typically will negotiate directly with the other party’s attorney, but we strongly prefer to have the business people on both sides reach a mutually acceptable agreement. After the parties have decided on the terms of a final contract, we ordinarily review the contract again and then, assuming the agreement is acceptable from a legal standpoint, forward it to the appropriate University officer for signature.

Q) Why should you follow these procedures?

A) If these procedures are not followed, the University can end up being bound by some very unfavorable contracts. Copier contracts with certain vendors provide a good example. They typically have long terms (e.g., 5 years) and no right of cancellation regardless of whether the copier is functioning properly. Vendors who are approved under University Services’ NUCOMP program, by contrast, sign contracts with a shorter term that provide the University with a clear right to terminate the agreement if the vendor fails to provide adequate service. If unfavorable contracts are signed, there usually is not much we can do if problems arise, especially if the contract does not contain a termination provision. Moreover, signing contracts without the appropriate authority is not within the scope of your employment and could, under some circumstances, lead to the person who signed the contract being held personally liable for the contractual obligations.

* This summary originally appeared in substantially the same form as an article in the February 2003 Purchasing Resource Services’ Informer.