Drafted: November 10, 2008
Approved: October 4, 2010
Written contracts are often necessary in order to clarify the intent of the College and other parties with whom the College enters into relationships. Well-executed written contracts clarify and define the agreement between the parties and protect against unnecessary risks to the College's resources and reputation. This policy provides guidance for the development and use of written contracts, describes situations for which they are required, and identifies exceptions to those requirements.
Under this policy, a contract is an agreement between Hampshire College and another party that is intended to have a binding obligation and/or legal effect. Contracts contain the terms and conditions under which goods, services, or other considerations of value are furnished by either party. Effective contracts provide a common understanding and the essential terms and mutual obligations defined within the agreement that exist between the parties. In addition to formal documents commonly understood to be contracts, documents such as purchase orders; service agreements; leases; and letters or memoranda of agreement, understanding, and intent are contracts if there is a College interest at stake and something of value is exchanged.
Applicability of Policy
This policy applies to all agreements between Hampshire College and any other party, with the following general exceptions:
- Employee contracts between Hampshire College and its employees (see the Employment Policy Handbook).
- Contracts involving financial aid and student loans.
- Contracts regarding academic matters that do not involve the receipt or expenditure of funds. They are encouraged, however, when liability issues could arise through the agreement.
- Financial investment management contracts (contact the vice president for finance and administration for guidance).
- Service learning agreements with community partners or schools or other volunteer activities are not required, but they are encouraged, particularly when liability issues could arise through the agreement. If a contract is written for these purposes, it will fall under the provisions of this policy.
- The Student Handbook.
When Are Written Contracts Required and When They Are Not Required
Not every arrangement involving the purchase of goods or services by the College, or the use of College facilities or resources by third parties, will require a written contract, but many do. In general, if the arrangement involves any significant risk or potential liability that needs to be allocated between the parties, or involves a situation where the duties and responsibilities of the parties are not so basic and obvious that they do not need to be spelled out in writing, then a contract should be used. In the following subsections, some common types or categories of commercial or business transactions are described, and situations requiring (or not requiring) a written contract are specified.
Keep in mind that contracts may be originated either by the College or by the other party to the agreement. Regardless of where they originate, they are typically modified by the other party and the revision approved by both parties.
Purchase of goods: Finished or "off the shelf" goods that are commonly purchased by cash or credit card (usually valued at or less than $4,999) do not generally need a contract. Finished goods or equipment that are part of construction projects, however, or which require the vendor to deliver, install and/or service the goods on campus usually require a contract and should be purchased using the College purchase order form or other contract form that will set forth basic terms and conditions including insurance and indemnity agreements. Five thousand dollars is the College's capitalization threshold. Hampshire College does not permit purchases of $5,000 and above on purchasing cards.
Provision of goods (the College sells something to another party): Finished goods that are commonly purchased by cash or credit card do not need a contract (e.g., sales of goods at the College store, on-line product sales). If the College makes a gift of used equipment to any person or organization, however, a release from the recipient is required. An agreement is also required in cases where the College is providing goods (e.g., software or creative works) and the parties need to be clear about issues such as specifications for the goods, the manner and timing of delivery, limitation of warranties, opportunity to cure defects, or payment terms.
Provision of services: We require contracts in place for instances where the College is providing services, facilities, or other resources to third parties. Examples include camps; conferences: persons or companies filming on campus: and other special events on campus such as weddings, receptions, seminars, etc. Services related to sponsored research are governed by a separate set of policies and procedures appearing elsewhere on this web site.
Purchase of Services: In general, services that the College (including student activities) is procuring and that will be provided on campus for hire should have written contracts. This includes arrangements with independent contractors for facilities work, caterers, speakers, consultants, performers, videographers, etc. Services that are provided off campus for payment upon conclusion of the work (e.g., a person is hired to write an article and receive payment upon receipt of satisfactory product) may or may not require a written contract. As stated above, contracts should be used whenever the arrangement involves any significant risk or potential liability that needs to be allocated between the parties, or involves a situation where the duties and responsibilities of the parties are not so basic and obvious that they do not need to be spelled out in writing. A contract should also be used when other specific concerns need to be addressed, such as ownership of the work.
Arrangements involving low-dollar value, and relatively minor professional services related to scholarship activities, such as hiring a book editor; indexer; translation or transcription services; analysis services; requisition of instruments or equipment or small immediate repairs to instruments or equipment that the person hiring the services has budget authority for through his/her grants; research accounts; or faculty fellowship do not require written contracts, unless the equipment to be repaired or serviced is on campus and the work is potentially hazardous.
Regardless of the cost of the service provided, where the service is provided, or whether a contract is executed, where the service is provided, members of the campus community may not pay for services out of their personal accounts and then seek reimbursement from the College for these expenses. Rather, all payments for services must be made directly from the College to the individual(s) providing the services in order for the College to comply with its tax and other federal reporting obligations.
Entertainment: Any arrangement that commits the College to hire entertainers or provide entertainment services requires a written contract. All payments for entertainment services must be paid directly by the College to the individual(s) providing the entertainment in order for the College to comply with its tax and other Federal reporting obligations.
Art / Exhibits: Any agreement to borrow or lend works of art, special collections, archives, or exhibits requires a written contract.
Miscellaneous: Any agreement with a third party that could create a condition that could result in more than a minor liability to the College (whether in favor of the contractor, its employees or others) or that could feasibly result in a dispute if the understandings and obligations of the parties are not clearly specified in advance, should normally be the subject of a written agreement. These arrangements should also be reviewed against these guidelines and against the contract template list to help you determine if a contract is appropriate or necessary.
Vendors may attempt to provide goods or services without a contract in order to avoid the cost and/or responsibility of negotiating and/or abiding by terms and conditions that would protect the College in a transaction. If there is any question about the need for a contract, consult the risk manager, who can assist in developing a contract and guiding it through the review and authorization process, prior to any negotiations.
Identification of the College
The College shall be identified as The Trustees of Hampshire College in all agreements and contracts. Departments and individuals may not contract in their own name on behalf of the College, but must identify the College as the contracting party. (The department may be identified in the agreement as the office though which the contract is being made.) The official College address is 893 West Street, Amherst, MA 01002-3359 in all contracts and agreements. (See Procedures: Template Forms for wording.)
Contract forms, templates, and required language are stipulated in contracting procedures, which may change from time to time. If the forms and templates provided do not seem appropriate for the transaction or arrangement being contemplated, or if such forms or templates are a good starting point but clearly need modification, you should consult as necessary with the risk manager or other College staff (see Getting Help) to define the proper language for your particular situation.
Contract Approval and Signatory Authority
Signatory authority at Hampshire College is delegated at times, but contract approval rests with the College's senior managers and officers. Spending limits or payment approval (following within a contract) can be delegated with significant variation depending on the nature of the contract.
Contracts over $100,000 must be approved by the President, the vice president for finance and administration, or the vice president for academic affairs and dean of faculty. In addition to these approvals, facilities and technology projects over $1,000,000 must also be approved by the board of trustees and the investment, reinvestment, sale, or transfer of funds, real estate, or any other property held for investment may be made only by a majority vote of the finance committee.
Other contracts that must be approved by the division heads for their respective divisions (the secretary of the College; the vice president for finance and administration; vice president and dean of faculty; dean of student services; chief advancement officer; and special assistant to the College for diversity and multicultural education) are outlined in Procedures. These individuals also have the authority to designate signatory authority within their divisions. Divisions and departments will be responsible to manage and direct contract approval, signatory authority, and spending authority for their staff. This process is outlined in Procedures.
No person who is not an authorized signatory may enter into binding contract negotiations without permission from a signatory and his or her department head or chair. Those signing without this authority may incur personal liability, and/or may be subject to discipline by the College, including termination.
Types of Contracts Requiring Additional Review
Proposed contracts that do not contain standard indemnity or insurance language, that have clauses that are not permitted, that provide revenue sharing with the institution, that vary significantly from standard template language or that require work by a department other than the one entering the agreement require additional review. Details concerning such requirements are provided in Procedures.
If a reviewer believes that the contract language is not in the best interest of the College, s/he will communicate all concerns to the responsible contracting department. Unresolved differences of opinion should be brought to the next higher level of management. The contracting party (department) with the consent of its managing vice president or the President of the College has the ultimate responsibility for and authority to enter into the agreement, regardless of differences of opinion from reviewers, subject to this policy and specific procedures. Purposeful assumption of higher risk may mean that the department entering the contract utilizes other or additional risk management strategies to control the risks.
When contracts will impact the work of another department, the contracting department must notify the affected department during the contracting period. Examples are provided in Procedures.
Legal Counsel Review
If a contract/agreement includes provisions that pose a substantial risk to the College or new, non-standardized clauses which the College department representative is not familiar and/or comfortable with, the vice president for finance and administration or the risk manager should be contacted. The vice president for finance and administration or risk manager will determine whether legal counsel should be consulted to ensure the contract/agreement protects the College and is consistent with all applicable laws. Legal counsel review should only be requested by the vice president for finance and administration, the risk manager, or another division vice president or the President or his/her designee.
Additional information on contract review is provided in Procedures.
Clauses not Permitted
Automatic Renewal: The College does not allow contracts to contain an automatic renewal clause unless they have a provision permitting the agreement to be cancelled at will, which could include a specificed number of days notice period prior to cancellation.
Limitation of Liability: The College does not allow a contracting party to limit its potential liability except in rare or specific circumstances. All rights of recovery against others are automatically transferred to Hampshire College's property and liability insurance carriers. Limiting this recovery could adversely impact the College's insurance coverage.
Exceptions for State and Federal Agencies
The Commonwealth of Massachusetts, the federal government, and most states will not provide insurance or indemnity in their agreements with their contracting partners. In such instances, the College normally will accept the agency's contract without such provisions. When entering into a contract with such a governmental entity, it is recommended that the contracting party attach the College's standard addendum and any other desired language that may act as a guideline for the parties to follow in the event of an adverse event or outcome. Such attachment is not, however, likely to be considered binding. Contracting departments also need to be very careful in considering whether or not the other party is truly a state agent or not: many state universities or colleges do not have the same immunity protections as other state agencies (e.g., the state police), and some quasi-public entities may not be precluded from providing insurance or indemnification to other parties with whom they do business.
Requirement of an Arm's Length Transaction
All employees must follow the College's conflict of interest policy when bidding or offering contracts.
Any agreement that involves revenue sharing (including commissions, fees, or other payment) with the College for sales by a third party to another third party, including students, alumni, or employees, must be reviewed by risk management and the vice president for finance and administration or his/her designee. If the agreement is being entered into by the finance and administration division, it must be reviewed by another cabinet member as well. Such arrangements are rare and generally discouraged, since they normally signify a commercial joint venture in which the College may assume risk of loss, and may implicate non-profit tax questions or concerns.
If a person believes that a supervisor, colleague, subordinate, or any other person is acting outside the College policy on contracting, s/he should report all concerns to his/her division's cabinet representative or risk manager. (See Whistle-blower Policy). As per the Whistle-blower Policy, retaliation against any person who reports suspected or identified problems, malfeasance, or other wrongdoing is prohibited by law and College policy.
Hampshire College contracting procedures are included by reference in this policy; however, it is recognized that procedures may be changed more frequently than the policy. Contracting departments should refer to both policy and procedure when entering into and developing contracts and agreements.