Execution of Documents

Marc P. Goodman General Counsel February 14, 2013

What is “Committing” the University?

o  Usually, entering into contract or agreement

o  “Approving” the purchase of goods or services in PeopleSoft

o  Can be very broad, e.g., agreeing to allow University marks to be used

Why Attend C.U.?

Contracting “101” o  Exchange of promises that the law will

enforce n  A promise in exchange for something of value

o  Writing is not required n  Oral contracts

o  Agency

Agency “101”

o  Dean = Agent Pepperdine = Principal

o  An agent’s acts commit the principal n  Actual authority: Expressly given by Pepperdine n  Ostensible authority: “That authority that Pepperdine causes or allows a third

person to believe the Dean possesses”

o  The principal is committed to third parties who have relied on agent’s authority

o  An agent who acts without authority or in excess of authority may be held liable to the principal

So, What Happens if You Commit the University Without Authority….

o  University likely required to perform its obligations

o  University may view event as outside of job responsibilities and: n  Hold employee personally

liable

Who Can Commit the University? o  Execution of Documents Policy

n  Any amount: Any two of the chair, vice chair, secretary and assistant secretary of the Board of Regents

n  $2,000,000+: Any two Authorized Officers involving: o  Transactions authorized by Regents, o  Gift agreements if approved by Gift Review Committee, o  Debt repayments, fund transfers, draw-downs on lines-of-credit, or o  Investment and Banking transactions

n  $50,000 - $2,000,000: Any two Authorized Officers o  Unless is a “Routine and Recurring Transaction” (e.g., income tax withholding,

medical insurance, utilities) where a single Authorized Officer is sufficient n  $100,000: President n  $50,000: Any Authorized Officer n  $25,000: Any employee so delegated by the Exec. V.P. or CFO

o  PeopleSoft “Approvers”

Golden Rules of Contracting

Golden Rules

Rule One

READ the Contract from top to bottom

Golden Rules (continued ) Rule Two

Determine whether the contract should be reviewed by

General Counsel o  Is the contract amount over $50,000? o  Does the contract involve a high or unusual risk?

That Begs the Question…. Question: What if the contract amount is under

$50,000 but I’ve never negotiated a contract before?

o  Answer: Review General Counsel’s “Tips on Contracts Under $50,000”

…and More Questions…

Question: But how can I assess whether the contract presents a high or unusual risk?

GREAT QUESTION!!! Answer: Analyze the risk, or in the alternative

consider the question, “does this seem like a good idea?”

What is Risk? o  Financial

o  Reputational

o  Liability

Basic Risk Analysis

Nature of Risk x

Likelihood of Occurrence =

RISK

Example

o  Scenario One: University enters into a large contract to buy cases of copy paper on a recurring basis.

Analysis

o  Nature of Risk: Although the contract amount is large and the University buys large quantities of copy paper on a recurring basis, a contract for the sale of paper poses a very low financial, reputational or liability risk to the University.

o  Likelihood of Occurrence: The likelihood that someone would be harmed with respect to a contract for the purchase of copy paper is fairly low.

o  Risk: LOW

Example

o  Scenario Two: University enters into contract for rock climbing wall at University-sponsored event for $1,200.

Analysis o  Nature of Risk: Although the contract

amount is quite small, and the sponsoring of a rock climbing wall is a unique or very infrequent event, this is a high-risk event in that it combines potentially inexperienced or distracted climbers with potentially negligently maintained equipment and/or inexperienced or poorly-trained staff. There is a possibility of severe bodily injury or death resulting from this type of activity.

o  Likelihood of Occurrence: The risk of

falling is high with respect to such an inherently risky activity.

o  Risk: HIGH

Example

o  Scenario Three: University enters into contract for replacement of telephone switches.

Analysis o  Nature of Risk: The contract

amount is large, and ordinarily the replacement of telephone switches seems fairly routine and unlikely to cause harm. However, failure of replacement telephone switches would cripple the University’s business operations, resulting in a huge financial risk to the University.

o  Likelihood of Occurrence: The risk of failure of replacement telephone switches is low.

o  Risk: HIGH X

Managing Risk o  Identify exposures creating risk o  Quantify/qualify risk o  Conduct Risk Analysis

n  Nature of Risk x Likelihood of Occurrence = RISK

o  Mitigate Risk n  Reduce Likelihood of Occurrence n  Minimize Impact of Occurrence

The Road to General Counsel

Golden Rules (continued ) Rule Three

Information, Information, Information: How the

Contract Review Summary Helps the Office of the General Counsel

Contractual Transfer of Risk

o  Indemnification o  Insurance o  Limitation of Liability and Disclaimers o  Termination for Convenience

Golden Rules (continued ) Rule Four

Take the comments received from the Office of the General Counsel to

negotiate a better contract.

Remember…. Attorney/Client Privileged Education Empowerment Negotiation

Negotiation of Contracts

o  University employees may engage in the negotiation of any contract only after obtaining the express approval of a University officer, agent, or employee.

o  Under no circumstances should any employee give verbal or

written assurances or commitments on behalf of the University without being so authorized.

Written Final Approval Required

All employees negotiating contracts on behalf of the University shall inform the other party that no terms are final until approved in writing by a University officer, agent, or employee who is authorized to do so.

Common Questions Question: Who keeps the finalized contract? Answer: Each department is responsible for

maintaining any executed contracts.

Common Questions Question: Certain contracts are recurring contracts. These are contracts where the University has a good relationship with the same vendor. If nothing has changed with the contract terms, should I get that contract reviewed? Answer: YES! Before renewal, take the opportunity to propose adjustments in the terms as necessary and communicate with the General Counsel’s Office regarding potential new requirements.

Common Questions Question: Which contract should I choose? Answer: There are several options, including

1.  Standard Consultant Services Agreement 2.  Construction Contracts 3.  Purchase Order Terms & Conditions 4.  Other Party’s Contract 5.  Special Contracts:

o  In-N-Out

Contracting Protocol Take-Aways 1)   Express Authority. 2)   Negotiation of Contracts. 3)   Written Final Approval Required. 4)   Written Contract Required For Contracts

over $49,999. 5)   General Counsel Review. 6)   Contract Questions.

Congratulations on a Successful Contract!!!

Cer$ficates  of  Insurance  &  Indemnifica$on:  

Protec$ng  the  University’s  Assets      

Lauren  W.  Cosen$no  Associate  Vice  President  

Human  Resources,  Insurance  &  Risk    

Indemnifica*on    •  An  indemnifica$on  clause  in  a  contract  iden$fies  ahead  of  $me,  who  is  responsible  for  what.    

•  One  Party  agrees  to  be  financially  responsible  for  specified  types  of  damages.    

•  Creates  incen$ves  for  the  par$es  involved  to  be  responsible!  

In-­‐N-­‐Out  Burger  is  responsible  for  their  own  mobile    kitchen  truck’s  maintenance…  

A  vendor  is  responsible  for  its  driver’s  safe    driving  while  on  our  campus…  

 

An  Earth  Day  vendor  is  responsible  for  properly  installing  and  maintaining  their  booth  display…  

 

Why  does  Pepperdine  require  outside  par$es  to  have  insurance?  

•  The  other  party’s  insurance  will  pay  the  indemnifica$on.  Pepperdine  wants  this!  

•  We  do  not  want  to  have  the  University’s  insurance  respond.  

Insurance  Requirements  

 Cer*ficates  of  Insurance  What  are  they  good  for?  

 

•  They  serve  as  evidence  of  coverage.  

•  They  will  disclose  that  the  policy(ies)  includes  protec$on  for  the  indemnifica$on.  

•  Acord  format  is  the  standard  format  u$lized  by  the  industry.  

Acord  Insurance  Cer$ficate    

Cer*ficates  of  Insurance    •       During  the  term  of  the  agreement,  including            extensions,  “Consultant”  must  furnish            cer$ficates  of  insurance  to  evidence  the  required            insurance  is  maintained.  

•       Failure  to  submit  the  cer$ficate  15  days  before            entering  University’s  premises  cons$tutes  a            material  breach  of  the  agreement.  

Pepperdine’s  Consultant  Services  Agreement:  

•  “Consultant”  must  maintain  specified  insurance  during  the  term  of  the  agreement  

•  Insurance  limits  to  look  for:  

•  Per  Occurrence  –  this  is  the  most  that  the  policy  will  pay  as  the  result    of  a  par$cular  incident/claim  

•  Aggregate    -­‐  the  "Aggregate  Limit"  is  the  most  the  policy  will  pay  as  a  result  of  all  occurrences  during  the  policy  term  (usually  one  year)  

Insurance  Requirements  

Pepperdine’s  Consultant  Services  Agreement:  

•  Commercial  General  Liability:  $1,000,000  •  Personal  injury  •  Independent  contractors  •  Contractual  •  Par$cipants  •  Physical/sexual  abuse,  harassment,  and  molesta$on    

•  Workers’  Compensa$on  (statutory  limit):  $1,000,000    

•  Business  Auto  Liability:  $1,000,000  

Insurance  Requirements  

•  A.M.  Best’s  ra$ng  of  A-­‐  or  befer    •  Add  the  University  as  an  addi$onal  insured  on  the  actual  cer$ficate  of  insurance  

•  State  that  they  cannot  be  canceled  without  30  days  no$ce  

•  Documenta$on  must  be  received  prior  to  the  effec$ve  date  of  the  contract  

Insurance  Requirements    Pepperdine’s  Consultant  Services  Agreement:  

Contrac*ng  at  Pepperdine  

•  Process  of  contrac$ng  

•  Signing  authority  

•  Review  with  Supervisor    •  Contracts  over  $50,000  or  those  that  may  present  a  unique  risk  should  be  reviewed  by  the  General    Counsel  Office  

 

What  happens  when  the  outside  party  will  not  or  cannot  agree?  

•  Duty  to  manage  University  resources    •  Who  has  the  leverage?  •  Business  decisions    

•  Benefits:  how  important?  •  Poten$al  costs:  safety,  assets,  and  University  reputa$on  

 

Troubleshoo*ng  

Insurance  &  Risk  and  the  General  Counsel's  office  are  here  to  help!