When entering into contracts please remember the following basic principles:
Both parties obligations and responsibilities, be they economic or otherwise, should be clearly delineated within the four corners of the contract, specifically:
- What is Arcadia obligated to do?
- What is Arcadia not obligated to do?
- What are the other party’s obligations?
- What is the other party not obligated to do?
Make sure the contract term is clearly stated and that if the contract involves an exchange of monies, not just services, that there is not an automatic renewal clause.
- Many contracts state that the initial term will be for a period of 1, 3, or 5 years, then the contract will automatically renew for successive 1, 3 or 5 year terms, unless either party gives the other party notice of the intent not to renew within 30 days of the termination date in the initial term.
- We want to avoid this auto renewal for a few reasons:
- The University does not want to be locked into a financial commitment with an organization without any say as to when it may end;
- Management positions change and new management may not be aware of the original contract term and may miss the deadline to terminate and be stuck for an additional number of years.
- However, contracts that are for services only and for which you foresee the relationship lasting for years may have automatic renewal clauses to facilitate the relationship.
- But, if there is no money exchanging hands there should also be an easy escape/termination clause that allows either party to end the relationship at any time upon however many days notice without consequence, etc.
Always pay attention to the termination clause to be aware of how to get out of the contract if necessary.
As always, if you should have any questions and/or would like the Office of General Counsel to help you prepare a contract or review a contract presented to you we would be happy to do so. We want you to feel comfortable with the contracting process and to make sure that you don’t get trapped in a relationship that might not work out just because you missed something in the contract.
Also, as a reminder, please be aware of the Arcadia University Purchasing policy guidelines regarding contract signing authority and the specific contract amount that triggers a mandatory review of the contract by our office. For contracts requiring review by General Counsel, you must provide the us with a copy of the contract, along with the contract review checklist and allow at least two (2) weeks for review, so please plan accordingly.