Contracts

Contracts Overview

Contracts are a binding agreement between two parties in which each gives something in return for something else. For example, when you accept a job, the contract between you and your employer is for the services or skills you will perform in furtherance of your job in return for getting paid, benefits, etc. That is a contract. Signing a lease to live in a townhouse for six (6) months is a contract. You promise to pay a certain amount of rent, pay certain utility bills, and keep up the backyard while the realty company promises to provide you with a townhouse, pay for the water, and make sure the place is habitable (toilet works, a/c works, and bugs are controlled). If you are involved in a student group, then you are probably dealing with contracts if you sell things like tee shirts, have speakers or performers come to campus, rent a bus, or rent a room or a hall.

Get Your Contract in Writing and Signed

The most important concept to contract law is having your agreement in writing and signed by the parties involved. For some reason, courts, as well as society, tend to believe things more when we see them in writing. Also, if a person's signature is attached to the writing, then surely it must be true. That is also the case with contracts. Courts will generally look at a written contract signed by both parties treating it as a final written expression of the parties. When that happens and both parties fulfill the agreement, then all is well with the world. However, problems often arise in the formation and execution of contracts. Here are some examples of problems that might arise when dealing with contracts.

Are All Your Contract Terms Agreed to by the Other Party?

First, what happens when you are contracting with a printing company to have your programs for your big event printed up and you are still going back and forth on the terms of the agreement? You think you are still getting the kinks worked out in your agreement when the printer decides to go ahead and print your programs according to their last specifications. Meanwhile, you had already given them an updated version of the specifications in which you ask for the glossy paper instead of the standard paper and ask for a three-color format instead of standard black and white. As you can see, this is a problem for you because you are now getting programs that are not what you wanted. What will a court of law do with a situation like this one? The court will look at what was the intent of both parties. If it appeared that both you and the printing company had identified all the terms of the contract when you first sent your specifications and they quoted you a price and what all they would do, then you are probably stuck with your original agreement. If, however, you and the printing company were sending forms back and forth trying to agree on the terms of the contract, then you would have a case that the printing company acted when the terms of the contract were still not defined. Then you may be under no obligation to accept (or pay for) the programs and the printing company may also be responsible for paying you the difference of what the programs will cost for some other company to do the job right and what you would have paid the company who breached the original contract had they performed correctly. However, the court may impose terms normal in business transactions which contradict what you would have liked to see happen so you may end up with programs you don't like, don't want, and aren't what you ordered. Don't let this happen to you.

Was Your Contract Valid When You Signed it?

Second, what happens if you are the president of a group and you are not quite eighteen (18) years old and you make an agreement with a band promoter to have his band play for an event your group is putting on in two weeks? Is the contract enforceable? What if you turn eighteen (18) after the contract was signed but before the concert is performed? The general rule is that a minor is permitted to disaffirm a contract not only during minority but also within a reasonable time after reaching the age of majority (18 in Texas). Under the law, the contract you made with the band promoter may not be enforceable. So, if you decided not to have the band play for your group (breach of contract), you most likely could do it because you are a minor. Courts do not like it; however, when commerce is inhibited which is exactly what happens when minors are allowed to avoid contract responsibilities with third parties. You are best advised not to try to breach your contract and use age as an excuse. Other factors that may affect your capacity to contract with another person include being under duress, intoxicated, or coerced. Also, your contract will not be valid if it involves breaking the law or is otherwise illegal.

Along these lines, what happens if a member of your group signs a contract on behalf of your group but had no authority to do so by your group? Is your group liable for the consequences of this contract? This answer is going to depend on the role this group member plays in your organization. Usually, your group would have to indicate to the other party in the contract that it has given authority or permission to this person to enter into a contract. On the other hand, if this person has been making contracts for the group on previous occasions and it has always been understood that she is acting on behalf of the group, then the group may be responsible for the consequences of the contract. This is an area your group needs to watch. Make it clear to your participants what your group's policy is on entering into contracts. Without articulating your policy or creating a policy in this area, you may end up with members getting you involved in things you do not want to be in. Play it safe and let your members know ahead of time so you can avoid unpleasant surprises later.

Relationship with the University

As a recognized student organization, your group is entitled to all of the rights and privileges accompanying such recognition like the right to use of the university name, logo, symbols, and to request university funding. With this privilege also comes responsibility. There is a fine balance within the relationship between your group and the university you must keep in mind.

On the one hand, your conduct and decisions reflect on the university so it is important that you conduct yourselves and your affairs in an appropriate manner. On the other hand, you should not be representing to third parties in contract formations or other business dealings that you are representing the university. You are a student group recognized by Texas A&M but you are not an employee or a designated representative to enter into binding agreements on behalf of the university. Again, it is a fine line in the balance of responsibilities.

So, when you are involved with third parties and vendors while using the Texas A&M name, the recommendation to avoid this possible misperception as to your group's authority to act in a contract setting (either with direct or apparent authority) is to say:

Organization is a recognized student organization of the university and does not represent the university. The organization cannot contractually obligate the university. As a (member/officer) of organization, I enter into this (Contract/Agreement) on behalf of organization in my role as Pres/Treasurer/etc.

Including language like this, both orally and in writing, helps avoid any possible links between your activity and the university. Again, your ability to use the university name, logo, etc. does not make you a representative of the university. It merely allows you to use some of the privileges of being a recognized student group at Texas A&M University.

Although you may be reading this and thinking that disclaimer language such as this is unnecessary, you would be surprised at the misperceptions of outside vendors when you mention that you are a Texas A&M student group. If you leave it at that or add on things that make it seem that the university is behind you in making your agreement or contract, then the vendor or third party might believe that the university will take responsibility if the student group fails in its obligation. This is something that should not and cannot happen. Given the autonomy of student leadership, you must be willing to take responsibility for your decisions as they apply to yourself and your group. This is how you grow and develop as a student leader. Therefore, make sure you include language in your contract as mentioned above so that it is clear to others that your ability to enter into the agreement or contract is a function of your role as a leader in your group and not as a representative of Texas A&M University.

See the University Student Rules (http://student-rules.tamu.edu/) for more information on contracts.

Is Your Contract Fair to Both Parties?

Finally, what happens if you sign a contract that is just so one-sided that your organization is responsible for everything and the other party guarantees nothing? The term court's use in this case is called "unconscionability" which basically means that something is unfair. This public policy argument often works when a contract is so one-sided that the other party is really in a bad position. Now, do not falsely believe the court will save you from being impulsive or stupid because it will not. It will, however, protect you when you are in an inferior position and you sign a contract that is grossly unfair. Quite often, you will sign contracts that the other party, sophisticated in making contracts, waives all liability on their part and requires that any dispute involving the contract will be paid for by you. If you are not sophisticated with contracts, the court will probably strike some of the contract provisions or the contract entirely in order to make the contract fair.

Normal Parts of a Contract

Here are some things you will see in most standard contracts:

• Description- indicates what the contract covers, such as "Contract for Tee Shirts"Caption- indicates who the parties are to the contract and when the contract was made
• Background- indicates what each party's business or purpose is, like "Rick's Tee Shirts is located on 101 Old College Main and is in the retail business of selling tee shirts"
• Contract Duration- indicates how long contract is valid (often found early in document)
• Definitions- indicates what the meaning of commonly used words in the contract are like "they" means "Y Club" or "late" means "any promise fulfilled after the expiration of the time limit agreed to by both parties." It is important to define terms that have subtle differences in their meaning like "must" (absolute), "shall" (contingent upon), and "may" (permissive).
• Party Obligations- indicates what each party is responsible for in the contract like "Rick's Tee Shirts shall supply Y Club with 500 tee shirts on September 30 at $5.00 a shirt. Y Club must pay Rick's Tee Shirts $2,500 plus tax on the date of delivery."
• Operative Provisions- indicates what other things make up the contract like if any warranties or exclusions apply. Often, this is the place you will see disclaimer and limiting language designed to give the party who wrote the contract advantage over the party that signs the contract.
• Enforcement Provisions- indicates the part of the contract that deals with "What happens if..." (someone does not fulfill their end of the agreement, something not in the contract is causing problems, where to go if there is a dispute, what happens if the other party said we agreed verbally but it is not in the written contract)
• Closing- indicates that both parties agree to the contract and then they sign it.
  

Where to Go for Help with Contracts

As noted in the University Student Rules, a recognized student organization us to work through its advisor and the Department of Student Activities prior to executing a contract. Minimally, this review should take two week, so plan accordingly. It is important that you seek this help BEFORE YOU SIGN THE CONTRACT. If you wait until after you sign the contract, you may have created problems for yourself and your organization. Please seek help before you sign the contract.

This section has provided a basic overview to the contracting process for a recognized student organization. In sum, it is in your best interest to read the contract carefully and discuss with other members of your group, your advisor, and when applicable, legal counsel, any questions or problems you have with provisions of a contract BEFORE YOU SIGN IT. Furthermore, the contract should be submitted for review to the Department of Student Activities prior to execution. This allows for the university to assure no obligations are being made in the name of the university. Once you sign a contract it becomes very difficult to change provisions of the contract. Do it right the first time.

Sales 

Another area where groups need to manage their risk is that which relates to products your group may sell. Finals baskets which contain a variety of products, architectural or medical equipment, food, or any kind of sports equipment may be a potential hazard if a problem exists and someone is harmed. Your group could be held liable for selling or giving away a faulty product. Make sure your supplier is reliable and use common sense when deciding what products with which you may want to involve your group. For sales occurring on campus, consult the concessions process.

There are three separate theories of liability you may fall under when dealing with the sale of products: Negligence, Strict Liability, and the Uniform Commercial Code. Negligence is used as a theory of liability primarily when it is established that the seller is a non-merchant. Chances are that most student organizations that occasionally sell something on campus will fall under the category of non-merchant. Negligence is discussed in the liability overview, so only the other two theories of liability will be discussed in this section.

First, strict liability may be imposed upon you only if it can be shown that you are in the business of selling this product. So, if your organization is in the business of selling something many times throughout the semester, then you may fall under this standard. If so, then you will be strictly liable to your customer when you sell products to them that are considered to be in a defective condition that is unreasonably dangerous. In fact, not only does that standard apply to your product but it also applies to your packaging (i.e. sell a soda in a cup, the cup is your packaging).

Second, the Uniform Commercial Code ("UCC") governs the transaction of goods so if your group is selling products (i.e. tee shirts, calendars, mugs, flowers, etc.), then your group may fall under these laws. If you sell your product often and you hold yourself out as having specialized knowledge to the product to which you sell, then you will be considered a merchant and held responsible for the condition of the product. Usually, you would be responsible for making sure the good does what you say it will do, will work in the manner it is supposed to work, and is made for the purpose you say it is made for. The responsibility imposed under the UCC is really no different than common decency. If you sell a product to someone, it should work and do everything it is advertised to do. Simple enough. Chances are your organization will not be considered a merchant so you will not fall under the UCC. It is still important to know about it just in case you do fall under a "merchant" status because of your knowledge.

Beyond those theories of potential liability, you should generally refer back to the information provided above on contracts. Most, if not all, sales involve written contracts with outside vendors so protecting yourself in the contract process is critical to avoid additional liability. Also, you should refer to information regarding Texas A&M University's concessions policies.

For additional information on contracts contact Risk Management Services risk@stuact.tamu.edu, 4584371.Student Organization Rules