Contracts Checklist

North Carolina Agricultural & Technical State University’s Office of Legal Affairs and the Procurement Services Office prepared the Contract Checklist to provide information about contract terms for vendors/contractors and employees, and to assist authorized University employees in negotiating and reviewing contracts. The Contract Checklist is based on contracting guidelines from the Office of the North Carolina Attorney General and State rules.

INITIAL CONSIDERATIONS

Before you proceed with verbally agreeing to discussion terms or sending a contract for review, you have a responsibility to take some initial steps.

(1) Are you aware that the university now uses IntelAgree as its contract management system with built-in workflows?

___Yes
___No. (Click here for more information on IntelAgree or contact the Contract Manager in Procurement for additional information.)

(2) Do you understand the terms of the contract as written (i.e., does it say what you and the other party agreed to)?

___Yes
___No (Discuss the contract with your supervisor to make sure you are clear on the terms.)

(3) Is the person in contact with the contractor/vendor or submitting or reviewing the contract knowledgeable about the background, facts, and terms?

___Yes
___No (Discuss the contract with the person most knowledgeable before proceeding.)

(4) If the contract is for the purchase of goods or services or for consulting (Independent Contractor Agreement or Personal Services Agreement), have you consulted with Human Resources or Procurement Services to determine whether:

the worker performing under the contract is properly classified;
the contract complies with State Division of Purchase and Contract requirements; and
proper bid procedures have been followed.

___Yes
___No (Stop and confirm.)

(5) If the contract is valued at more than $1,000, have you confirmed that the contractor/vendor is not listed for the Iran Divestment Act or Companies Boycotting Israel?

___Yes
___No (Confirm by going to the North Carolina Department of the State Treasurer’s website at https://www.nctreasurer.com).

(6) Does the contract clearly and accurately state the “consideration” (what each party is getting)?

___Yes
___No (Confirm adequate consideration and include language such as: For good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows…)

PROHIBITED CONTRACT TERMS

Any contract containing the following terms must be modified or abandoned. There contract terms/clauses are prohibited.

(1) Does the contract subject NC A&T to tort liability beyond the limits of the North Carolina Tort Claims Act ($1,000,000 cap for negligence of state employee/agent acting within scope of employment), or otherwise waive the State’s sovereign immunity?

CAUTION: Any clause that provides for university liability or “assumption of risk” or “responsibility” for damages, accidents, claims, etc. may violate this prohibition.

___Yes (Modify the contract or abandon it). Contract Advisory is not an option.
Click here for an explanation of why this clause is prohibited and for language to use in negotiating the removal of this clause from the contract.
___No

(2) Does the contract provide for the University to “accept or assume responsibility” or “hold harmless,” or “save harmless,” or “indemnify” the contractor, or otherwise assume responsibility for paying the contractor's liabilities?

___ Yes (Modify the contract or abandon it). Contract Advisory is not an option.
Click here for an explanation of why this clause is prohibited and for language to use in negotiating the removal of this clause from the contract.
___ No

(3) Does the contract have terms that would make it subject to either the substantive law or the jurisdiction (also referred to “choice of law” or "forum" or "venue") of another state or country?

(4) Does the contract require binding arbitration or any mandatory dispute resolution (mediation clause is acceptable) other than legal action in North Carolina courts?

(5) Does the contract allow the other party to assign its right to payment or performance to a third party without subjecting the third party to all the defenses and claims the University would have against the original contracting party?

(6) Does the contract provide for the University to pay attorney fees, court costs, or other litigation expenses of another party if there is a dispute?

___ Yes (Remove the clause or abandon the contract). Contract Advisory is not an option.
Click here for an explanation of why this clause is prohibited and for language to use in negotiating the removal of this clause from the contract.
___ No

(7) Does the contract provide for personal liability of the signer or any other University employee?

(8) Does the contract include a “non-compete” clause (e.g., some sort of “exclusivity” or that the University may not contract with a similar service or product provider for a specified length of time during or after the expiration or termination of the contract)?

___Yes (Remove the clause or abandon the contract). Contract Advisory is not an option.
Click here for an explanation of why this clause is prohibited and for language to use in negotiating the removal of this clause from the contract.
___No

(9) Does the contract create a procurement relationship with an employee or the immediate family member of any employee of the University or State of NC?

___Yes (STOP. Contact NC A&T’s Director of Procurement Services). Contract Advisory is not an option. Click here for an explanation.
___No

NOTE: Prior written approval from Procurement Services and the North Carolina State Purchasing Office (SPO) is required before making University purchases from or through individuals who are employees or immediate family members of employees of the University or the State of North Carolina.

RISKY CONTRACT TERMS

Any contract containing the following terms must be modified by using alternate contract terms/clauses, the Contract Advisory, or abandoned.

(1) Does the contract seek to limit the other party’s liability?

___ Yes (Remove the clause or use the Contract Advisory; otherwise abandon the contract or contact the Office of Legal Affairs).

Click here for an explanation of why this clause is prohibited and for alternative contract clauses and language to use in negotiating removal of this clause.

___ Yes, but the contract is for user-installed software. The vendor may limit remedy for defective software to either replacement of the software or refund of the purchase/license price, at the University’s option. Otherwise, modify the contract or use Contract Advisory.

___ Yes, but the contract is for sale and purchase of information processing equipment, supplies, services, or licensing of software from IBM. (Remove the clause. IBM has agreed to unlimited liability to the State for personal injury or property damage claims).

___ No

(2) Does the contract say that all payments are immediately due upon breach of the contract or default in payment (also known as an “acceleration clause”)?

___Yes (Remove the clause or use the Contract Advisory; otherwise abandon the contract).
Click here for an explanation of why this clause is prohibited and for alternative contract clauses and language to use in negotiating removal of this clause.
___No

(3) Does the contract contain information about late payment penalties or finance charges?

___ Yes (Remove the clause or use Contract Advisory; otherwise abandon the contract).

Click here for an explanation of why this clause is prohibited.
___ No

(4) Does the contract alter the normal application of North Carolina general law of contract by including clauses that:

Violate the statute of limitations by providing less than three years for the University to file a legal claim or sue for breach of contract?

___Yes (Remove the clause or use Contract Advisory; otherwise abandon the contract.)

Click here for an explanation of why this clause is prohibited and for language to use in negotiating the removal of this clause from the contract.

___No

State that breach would cause irreparable harm and justify equitable relief or injunctive action?

___Yes (Remove the clause or use Contract Advisory; otherwise abandon the contract or contact the Office of Legal Affairs).

Click here for an explanation of why this clause is prohibited and for language to use in negotiating the removal of this clause from the contract.

___ No

Provide for liquidated damages or cancellation fees?

___Yes (Remove the clause or use Contract Advisory; otherwise abandon the contract or contact the Office of Legal Affairs.)

Click here for an explanation of why this clause is prohibited and for language to use in negotiating the removal of this clause from the contract.

___No

(5) Does the contract allow the vendor to repossess property or take action outside of court proceedings in response to a University breach of contract?

___Yes (Remove the clause or use Contract Advisory; otherwise abandon the contract).
___No

(6) Does the contract provide the other party with ownership or other rights (often called a “security interest” or “UCC statement”) in property that the university is purchasing?

___Yes (Remove the clause or use Contract Advisory; otherwise abandon the contract).
___No

(7) Has the other party requested that the University sign a “Business Associate Agreement” under HIPAA?

___ Yes (Do not automatically sign. In most cases, the presumption is that the University is NOT a “Business Associate.” Upload to IntelAgree for review).
___ No

(8) Does the contract provide that “time is of the essence” in the University’s performance of a service or provision of a product?

___ Yes (Remove the clause. Ensure that the parties do not have oral or “side” agreements. Include language that the contract contains all the terms of agreement between the parties.)

Click here for an explanation of why this clause is prohibited. If unable to negotiate removal of the clause, contact the Office of Legal Affairs or upload to IntelAgree for review.

___ No

(9) Does the contract allow the other party to use University email addresses of students or employees for commercial purposes or for any other purpose without prior University approval?

___ Yes (Either remove the clause or contact the Office of Legal Affairs for advice on revising the clause.)
___ No

OTHER IMPORTANT TERMS AND CONSIDERATIONS

(1) If the contract is for the purchase of electronic and information technology goods or services, have you made sure that the following language is included in the terms? Contractor warrants that its product or service complies with Section 508 of the Rehabilitation Act of 1973, as amended, or WCAG 2.1 AA with respect to accessibility for individuals with disabilities. In the event that the University receives any complaints or concerns regarding the accessibility of the product or service, Contractor agrees promptly to respond to and resolve those concerns. Further, Contractor agrees to indemnify and hold University harmless for any claims arising from the inaccessibility of its product or service.

___Yes
___No (Stop and add the language. If the contractor will not accept this language, contact the Office of Legal Affairs.)

(2) If the contract requires the contractor/vendor to work with sensitive populations or have access to security-sensitive areas of campus has the following language been included in the contract? “Contractor, at its expense, will conduct a background check for each of its employees, and for any employee of its subcontractors, who is assigned a task that requires access to residence halls or other areas designated by N.C. A&T as security sensitive...”

Drug distribution activity or felony drug possession
Sexual offenses, including stalking
Crimes of violence involving physical injury to another person
Child abuse, molestation, child pornography or other crimes involving child endangerment, including neglect and abandonment
Murder
Kidnapping
Any other crime involving moral turpitude

All contractor/vendor or subcontractor employees/workers with access to security sensitive areas have the responsibility to self-disclose to contractor any convictions that occur while assigned to N.C. A&T within three business days of the conviction...

___Yes
___No (Stop and add the language. If the contractor will not accept this language, contact the Office of Legal Affairs.)

(3) Does the contract contain a clause that says that the contract is the complete agreement of the parties?

___Yes
___No (Confirm that there are no oral agreements, “side” agreements, or “gentlemen’s” agreements and then include clause such as: This Agreement constitutes the entire agreement of the parties with regard to this subject matter, and supersedes all previous written or oral representations, agreements and understandings between the parties, whether expressed or implied.)

(4) If the contract is for the purchase of goods or services, is the following language included?

Access to Persons and Records: The State Auditor, N.C. A&T’s internal auditors, and the Joint Legislative Commission on Governmental Operations... will be given access to persons and records...

Work Authorization: As required by Section 143-133.3 of the North Carolina General Statutes, the Contractor certifies that it, and each of its subcontractors, verifies the work authorization of each of its employees under E-Verify...

Nondiscrimination: Contractor and any subcontractors will comply with the nondiscrimination and affirmative action requirements of 41 CFR §§ 60-1.4(a)...

___Yes
___No (Stop. Add the language)

(5) If the contract is for the purchase of goods or services, have you confirmed that the term of the contract does not exceed three (3) years?

___Yes
___No (Stop. Consult with Procurement Services. A contract with a term that exceeds three years requires prior approval from the State Purchasing Office).

(6) Does the contract have a clearly stated beginning date, ending date, and effective date?

___Yes
___No (Stop. Determine dates and add to contract.)

(7) Does the Contract contain terms that say time is of the essence for the contractor’s performance under the contract?

___Yes
___No (Confirm that the parties do not have any oral or “side” agreements and then include clause.)

(8) Is there language for notification of default, a method to cure such default, and specific steps provided for notice to parties?

___ Yes

___ No (If no notice or method for cure is included, review purpose of contract. If no specific steps are included for notice to parties, include a provision (e.g., All notices and other communications... shall be in writing...))

(9) Does the contract clearly establish time, place, and method of payment?

___ Yes
___ No (Include a clause establishing time, place, and method of payment (if applicable).
___ N/A (There are no payments or exchanges).

(10) Are payment terms at least NET 30 upon receipt and approval of invoice (i.e., that the University has up to 30 days to pay in full)?

___ Yes
___ No (Modify to reflect NET 30 terms unless Procurement Services allows otherwise.)
___ N/A

(11) If the contract is for personal services by an out-of-state person or entity..., does the contract provide that the University will withhold a 4% nonresident income tax on payments greater than $1,500 in any one calendar year?

___ Yes
___ No (Include withholdings clause that states: If [Name of Party] is not a resident of North Carolina... University shall withhold a 4% nonresident income tax...)
___ Not Applicable

(12) Does the contract contain a force majeure clause ("act of God clause") that applies to both parties?

___Yes (Clause consistent with the contract purpose.)

___No (Determine how acts of God are likely to impact the contract, negotiate and insert the following clause, if applicable: If either party’s performance of obligations under this Agreement is materially hampered... by reason of any fire, casualty, lockout, strike... the affected party shall be excused from performance...)

(13) Does the contract contain confidentiality or non-disclosure terms?

___Yes (Add clause to make it subject to the NC Public Records Act or insert “…unless disclosure is required by law.”)
___ No

(14) Does the contract provide for automatic renewal (evergreen contract), or renewal unless the University takes affirmative action to terminate?

___ Yes (Remove automatic renewal term and modify the contract to terminate on a specified end date (usually about 3 years). When applicable, include a provision permitting the agreement to be cancelled at will...)

Click here for an explanation of why this clause is risky and for language to use in negotiating the removal of this clause from the contract.

___ No

(15) Does the contract result in the University directly or indirectly making money in competition with private business?

___ Yes (The Umstead Act may be implicated. Click here to review information about the Umstead Act. Contact the Office of Legal Affairs with questions.)
___ No

(16) Are all attachments or documents referenced in the contract (including links to websites or other documents) attached?

___ Yes
___ No (Stop your review and obtain the additional information or documents.)

(17) Does the contract create or give rights to anyone other than the University and contractor?

___Yes (Consult with Procurement Services or the Office of Legal Affairs.)
___No

(18) Does the contract grant any party other than the University any “exclusive right,” so that the contract would limit for a period of time the University’s ability to grant similar rights to other persons or organizations?

___ Yes (Consult with Procurement Services to determine if the “exclusivity” is really necessary. If yes, modify the contract so that this right applies only to your department or the specific contract.)
___ No

(19) If the contract is for consulting or other personal services (artistic performance, etc.):

Have you consulted with Procurement Services and/or the Division of Human Resources to ensure that IRS "independent contractor" rules and University policies are being followed?

___Yes
___ No (Consult with Procurement Services and Human Resources.)

Does the contract involve the creation or modification of any intellectual property (copyright, patent, and trademark) by the party providing consulting or other personal services?

___ Yes (Ensure that the contract provides that any such intellectual property rights are owned entirely by the University (e.g., “University shall retain all right, title, and interest, including copyright in the work...”). Contact the Office of Legal Affairs with questions.)

___ No

Does the contract include a term in which one party assigns copyright in certain intellectual property to the other party?

___ Yes (Make sure that the language explicitly states that the assigning party assigns “all right, title, and interest, including copyright” in the property described. Contact the University’s Patent Agent in the Division of Research or the Office of Legal Affairs if you have questions.)

___ No

Does the contract require that the University provide the contractor with personal identifiers... or any other legally confidential information including “personally identifiable information” from student education records as defined by FERPA?

___ Yes (Contact the Office of Legal Affairs with any questions. Add the following clause: If University provides Contractor with personal identifiers... Contractor further certifies that it will maintain the confidential and exempt status... Contractor will indemnify University for any breach of confidentiality...)

___ No

(20) Does the contract allow the price or other terms to be changed in the future?

___ Yes (Consult with Procurement Services to obtain prior approval.)
___ No

(21) Does the contract allow the other party to use the University's name in any advertising, endorsement, or promotion?

___ Yes (Modify the contract to require advance written approval of content from the Associate Vice Chancellor for University Relations with language such as: [Name of Party] will not appropriate or make use of University’s name... without prior written consent...)

___ No

(22) Does the contract require the University to obtain insurance or a bond?

___Yes (Modify the contract to state that NC A&T is self-insuring by adding the following language: As a State Agency, North Carolina A&T State University is self-insured up to the limits of the North Carolina Tort Claims Act...)

___Yes, and the contract requires that the University provide proof of insurance (Contact the Office of Insurance in the Department of Environmental Health and Safety to obtain an insurance letter.)

___ No

(23) Does the contract provide for the other party to buy an insurance policy protecting NC A&T State University?

___ Yes
___ No (Modify the contract to include provision for proof of insurance within time frame by adding language such as: [Name of Party] will provide to University... written proof of insurance...)

(24) If applicable, does the contract provide for proof of insurance from other party within ten (10) working days of contract execution?

___ Yes
___ No (For proof of insurance, modify the contract to include provision for proof of insurance within specified time frame.)

(25) Does the Contract provide for payments beyond the current fiscal year?

___Yes, from State appropriated funds. (Add: “Payments beyond the current fiscal year are conditioned on appropriation of sufficient funds to cover the purposes set forth in this agreement”.)
___Yes, from other than State-appropriated funds. (Obtain approval from Materials Management.)
___No

(26) If the contract is for consulting or other personal services (artistic performance, etc.), have you consulted with Procurement Services and/or the Division of Human Resources to ensure that IRS "independent contractor" rules and University policies are being followed?

___Yes
___ No (Consult with Procurement Services and Human Resources.)

(27) Does the other party assert a right to exclusive control of any investigation, defense or settlement of any patent or copyright lawsuit or other claim filed against the University?

___ Yes (Remove the provision or revise. Click here for an explanation of why this clause is prohibited.)
___ No

(28) Does the contract require personnel, space, or equipment in addition to what is presently available for the project, or does it require alterations to physical plant, installation, or maintenance of equipment?

___ Yes (You are required to obtain approval from the Vice Chancellor for Business Affairs (or designee) that such requirements can be provided within the limits of funds available.)
___ No

(29) Does the contract require the University to provide any type of warranty or guarantee of services being provided by the University for a fee?

___ Yes (Replace that requirement with wording that the University will use “reasonable efforts.” If unable to negotiate removal of the clause, contact the Office of Legal Affairs.)
___ No

(30) Is the contract with a service organization to process transactions for the University that have a significant impact on University financial statements (e.g., investment managers, custodial banks, trustee banks, loan servicer, bill payment, etc.)?

___ Yes (The service organization is required to have an annual Statement of Standards for Attestation Engagements (SSAE) 18. Modify the contract to include language: [Service Organization] is required to have an annual SAS 70 audit of its internal controls...)

___ No

(31) Does the contract involve the use of one or more University facilities that require scheduling, user fees, or both?

___ Yes (Follow University Policy 1009, Use of University Facilities and Space or contact the University Event Center.)
___ No

(32) Does the contract involve the disclosure or maintenance of any personally identifiable patient information, including records of medical treatment or billing for medical treatment?

___ Yes (If the contract provides for the University to provide the contractor with SSNs, personal identifiers... attach the University Data Protection Agreement, and make sure the language of the contract explicitly provides as follows: “All parties to this Agreement shall abide by all laws and regulations governing the confidentiality of patient information...”)
___ No

(33) Was a Contract Advisory used?

___ Yes (Attach completed and signed Contract Advisory.)
___ No

(34) Does the contract create competition with other areas of campus?

___ Yes (You must obtain approval from the Director of Procurement Services or Vice Chancellor for Business and Finance.)
___ No

(35) Is the name and authority of the other party’s representative provided? Are they identified by a corporate or individual name? If corporate, is their state of incorporation or location included? Are abbreviations used and are they consistent throughout the document and in the signature blocks?

___Yes (Ensure and confirm that signature lines match name and authority exactly.)
___No (Stop your review. Obtain and include (or attach) evidence of authority.)

(36) Does the contract clearly establish who will execute (sign) the contract for the other party and in what capacity? Are names, titles, addresses, telephone, fax numbers, and/or email addresses (as applicable) of each party’s point of contact included?

___Yes
___No (Stop review, obtain, and then continue with review).

(37) Does the person who will execute the contract for NC A&T State University have the legal authority to do so in accordance with University Policy 1102, Signature Authority and Delegation of Authority to Sign Contracts and Delegations of Signature Authority, Appendix A to University Policy 1102, Signature Authority?

___Yes (Ensure and confirm that signature lines match name and authority, and has the title listed accurately.)
___No (Change name and title to that of a person who has authority to sign pursuant to Appendix A to University Policy 1102, Delegations of Signature Authority).

(38) Does the contract allow the other party to unilaterally terminate the contract outside of specific terms in the contract to do so?

___ Yes (Modify the contract to reflect that the University gets a pro rata refund by adding a clause such as: If [Name of Party] terminates this Agreement for any reason prior to fulfilling all of its obligations... [Name of Party] shall repay to university any amounts received...)
___ No