Contracting at ISU

picture of Campanile and trees in winter

 

What is a contract?

 A contract is a legally binding agreement that imposes upon the parties a duty to perform the promises embodied in the agreement. If one does not fulfill their duty to follow through with their promise, one is in breach of the contract. When one breaches the contract, the other party is entitled to a remedy. The remedy will generally restore the non-breaching party to the position they would have been in had the other party never breached.

Contract formation begins when one party makes an offer to indicate their willingness to enter into an agreement with certain terms. The contract is formed when the other party indicates acceptance or assent to the agreement. In order to be a contract, the agreement must include valid consideration. That is, both parties must contribute something to the agreement such as money, labor, or a return promise. To form a valid contract, both parties must have the legal capacity to enter into a contract and the purpose or objective of the contract must be legal.

What is a University contract?

A University contract involves mutual commitments between the University and another party that are intended to be binding. Commitments may be in the form of money or promises to transfer property or services.

A common misconception is that Memoranda of Understanding (MOU) and Memoranda of Agreement (MOA) are not contracts. Most often MOU’s and MOA's meet the above definition and therefore should be treated as contracts.

Sometimes the question arises whether a contract is only a commitment by an individual faculty or staff member, though it may relate to their job, so that they have the power to enter into such contracts without University approval. If the agreement clearly is drawn with the individual and not the University as a party, it will not bind the University. However, employees should consider whether such contracts require commitments in conflict with University policies or the employee’s work for the University (such as transfer of intellectual property rights or conflict of interest concerns).

Contracts signed by student organizations are not in themselves binding on the University. However, the activities of some student organizations are joint projects with the University and require the separate signature of an authorized University official. To assure responsible conduct of student contracting, all such contracts must be made consistent with student organization rules.

Who can sign a contract or make a binding offer for the University?

The Board of Regents has delegated authority to sign contracts to the President, who in turn is permitted to delegate the authority to sign contracts to other University officials. A list of the University officials to whom the President has delegated authority and the types of contracts they are authorized to sign may be found in the Contracting Authority policy. The Contracting Authority policy allows some of these University officials to re-delegate that authority to others by issuing a memorandum of delegation approved by the Office of University Counsel. The Contract Delegations page lists the individuals who currently have a memorandum of delegation.

An individual may be asked to countersign a contract, which means that the individual is signing in addition to an individual who has been authorized to sign contracts on behalf of Iowa State University. For example, a faculty member who is a principal investigator on a research project may be asked to countersign an agreement with the sponsor of the research to indicate that the faculty member is willing to undertake the research project. Countersigning a contract is permissible as long as an individual who authorized to sign contracts on behalf of Iowa State Univerity also signs the contract.

Remember that responding to a Request for Proposal (RFP) is a binding offer that must receive prior clearance unless the response to the RFP indicates it is subject to approval by an individual with the authority to bind the University. Note, however, that most RFP's will say that the response must be signed by an authorized party and must be unconditional. In such cases, a University official with delegated authority must sign the response.

If you believe you or your unit should have contract authority, please review the Contracting Authority Policy and then contact the Office of University Counsel at 4-5352. 

What happens if a contract is signed or an offer is made without authority?

    Such a contract is not binding on the University and may be disclaimed.  Under the law, the other party may hold the unauthorized signor personally responsible.

     Does a contract have to be in writing?

    Many contracts can be oral. However, certain contracts are void unless they are in writing, such as those calling for performance of obligations to be completed more than a year in the future. In addition, because the University is a state entity accountable to the public, it is preferable that contracts be in writing.

    Who can assist me with a contract?

    The Contract Assistance and Templates page lists common contracts needed by University units and the departments to contact for assistance with the contracts. You are also welcome to contact the Office of University Counsel for assistance.