Addendum Contract Clauses - Reference Materials

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(Revised 2/6/2018

This information is provided to assist both U.T. institutions and contractors. U.T. institutions may provide contractors with a copy of this document or its URL. Note that references to “us,” “we” and “our” generally refer to U.T. institutions, while references to “you” and “your” generally refer to the contractor.

 

The U.T. System Office of General Counsel (OGC) standard Addendum contains several clauses:  some are explicitly required by Texas law or included to help us comply with specific provisions of Texas law, while others constitute "good contracting" practice.

The Family Code Child Support Certification; Breach of Contract Claims by Contractor; Contractor Certification regarding Boycotting Israel; and Public Information clauses are explicitly required by Texas law to be included in our contracts.

We include the Tax Certification; Payments; Payments by Electronic Funds Transfer; Payment of Debt or Delinquency to the State of Texas; Payment Card Industry Standards; Contractor Certification regarding Business with Certain Countries and Organizations; Access by Individuals with Disabilities; Notices; Loss of Funding; State Auditor's Office; Limitations; Ethics Matters/No Financial Interest; and Subcontracting clauses to help us comply with specific provisions of Texas law.

Finally, "good contracting" clauses include: Representations and Warranties by Contractor; Venue/ Governing Law; Entire Agreement/Modifications; External Terms; and Addendum Controlling provisions. These clauses address issues of general concern such as: whether your business is in good standing and has given the person who will sign the contract authority to bind your business to the terms of the contract; where lawsuits will be filed if we ultimately have a dispute that we can't otherwise resolve; making sure that we both understand the contract contains all the terms of the transaction and that things that may have been discussed but did not make it into the final signed contract are not part of the deal, among others.

Doing business with the state is not the same as doing business with a private company. Many laws regulate our activities as we conduct the state's business. We cannot ignore these laws and we cannot change them. The policies underlying these laws represent the judgment of the people of Texas that state agencies should conduct business effectively, efficiently and in accordance with the state's priorities. U.T. System strongly supports the policies underlying these requirements. We have found that when the requirements and their rationale are explained, contractors are usually willing to accept them.

Some of the Addendum clauses are explained in detail below. It is possible that not every one of these clauses will be part of the Addendum in each circumstance. If a U.T. institution is unable to secure a contractor's acceptance of the clauses that apply to the contract, the institution may consult with its legal office or OGC.

 

Required Clauses

 

Child Support Certification

Section 231.006 of our Family Code requires all contractors who do business with the state to certify that they are not delinquent in the payment of child support. If a contractor says that he or she is not delinquent, but it turns out that the contractor is, the contractor must acknowledge that we can terminate the contract and withhold payment.

 

Contractor Certification regarding Boycotting Israel

Chapter 2270 of our Government Code prohibits us from entering into a contract for goods or services that (a) has a value of $100,000 or more that is to be paid wholly or partly from public funds and (b) is with a for-profit company, not including a sole proprietorship, that has 10 or more full time employees unless the contract contains a written verification from the company that it (1) does not boycott Israel, and (2) will not boycott Israel during the term of the contract. Boycotting Israel includes refusing to deal with, terminating business activities with, or otherwise taking any action intended to penalize, inflict economic harm on, or limit commercial relations specifically with Israel, or with a person or entity doing business in Israel or with an Israeli-controlled territory, but does not include an action made for ordinary business purposes.

 

Breach of Contract Claims by Contractor

Chapter 2260 of our Government Code requires all our contracts for the purchase of goods or services to include a clause stating that the dispute resolution process provided by Chapter 2260 will resolve any breach of contract claim brought by contractor.  More information about this clause is provided at Required ADR: Do We Have To? http://utsystem.edu/offices/general-counsel/required-adr-do-we-have.

 

Public Information

This clause identifies how Texas state agencies are required to comply with the Texas Public Information Act (TPIA), Chapter 552 of our Government Code.  Additionally, Section 2252.907 of our Government Code requires a contract between a state governmental entity and a nongovernmental contractor involving the exchange or creation of public information to contain a provision requiring the contractor to make information not otherwise excepted from disclosure under TPIA available in a specific format that is agreed upon in the contract and accessible by the public.

 

Compliance Clauses

Tax Certification

Section 2107.008 of our Government Code does not explicitly require that we include a clause about state taxes in our contracts, but it says that we cannot pay a contractor who has been reported to the Texas Comptroller as having a tax delinquency. We must determine whether a contractor is delinquent to keep from violating this law. This certification that the contractor is not delinquent helps us comply with Section 2107.008.

 

Payment of Debts to State of Texas

Technically, Sections 2107.008 and 2252.903 of our Government Code only require us to include this clause in contracts with persons whom the Texas Comptroller has determined are in debt to the state or delinquent in the payment of taxes. Unfortunately, getting a clear answer from the Comptroller is more difficult than just asking contractors to acknowledge that if they are in debt to the state, payments they are owed under the contract will first be applied to pay off their debt.

 

Contractor Certification regarding Business with Certain Countries and Organizations

Chapter 2252, Subchapter F of our Government Code prohibits us from entering into a contract with a for-profit company identified by (1) the Texas Comptroller as a company with business operations in Sudan, (2) the Texas State Pension Review Board as a company with business operations in Iran, or (3) the Texas Comptroller as a company known to have contracts with or provide supplies or services to a foreign terrorist organization. Excepted from the prohibition are companies the United States government affirmatively declares to be excluded from its federal sanctions regime relating to (1) Sudan, (2) Iran, or (3) foreign terrorist organizations.

 

Access by Individuals with Disabilities
Chapter 2054 of our Government Code authorizes the Texas Department of Information Resources (“DIR”) to adopt rules requiring any “electronic and information resources” that are developed, procured, maintained, or used by state agencies to be accessible by individuals with disabilities. DIR accessibility rules are set out in Title 1, Rule §206.70 and Chapter 213 of the Texas Administrative Code. This provision is included in our contracts to ensure that any electronic and information resources provided, developed, maintained, or used by you comply with DIR accessibility rules.

The “electronic and information resources” subject to DIR accessibility rules include, but are not limited to:

  • any equipment or interconnected system or subsystem of equipment that is used in (i) the creation, conversion, duplication, or delivery of data or information, or (ii) the automatic acquisition, storage, manipulation, management, movement, control, display, switching, interchange, transmission, or reception of data or information;
  • computers, ancillary equipment, software, firmware and similar procedures, services (including support services), and related resources;
  • telephones and other telecommunications products;
  • information kiosks;
  • transaction machines;
  • Internet websites;
  • multimedia resources; and
  • office equipment, including copy machines and fax machines.

However, “electronic and information resources” subject to the DIR accessibility rules do not include any equipment that contains embedded information technology that is used as an integral part of the product, but the principal function of which is not the acquisition, storage, manipulation, management, movement, control, display, switching, interchange, transmission, or reception of data or information. Examples include:

  • HVAC (heating, ventilation, and air conditioning) equipment such as thermostats or temperature control devices; and
  • medical equipment where information technology is integral to its operation.

Note that if the embedded information technology has an externally available web or computer interface, that interface is considered an electronic and information resource.

For more information see Section 2054.451 of our Government Code and  Subsections (6) and (9) of Title 1, Rule §213.1 of the Texas Administrative Code.

 

Loss of Funding

Normally, we do not enter into an agreement that obligates us to spend money we aren't reasonably confident we will have. However, sometimes, an agreement's payment terms may have us paying for goods or services over a period of time that is longer than we have current appropriations from the Texas Legislature or allocations from the Board of Regents to cover. While we expect to receive funds to continue the agreement, we are not capable of promising that we will receive the funds. We include this clause to give ourselves the ability to terminate a contract the Legislature or the Board of Regents does not fund.

 

State Auditor's Office

The State Auditor's Office may conduct an audit or investigation in connection with procurements made by us as set out in Sections 51.9335(c), 73.115(c) and 74.008(c) of our Education Code. This provision is included in our contracts to (1) notify you that the State Auditor may require you to provide records related to the procurement; and (2) to be sure you notify any subcontractors about this information.

 

Limitations

The University includes this paragraph to provide you notice that we are only able to agree to contract terms to the extent we are authorized to do so by our laws and Constitution.  The following Texas cases and Attorney General opinion demonstrate these limitations:

  • State ex rel. Dept. of Criminal Justice v. VitaPro Foods, Inc., 8 S.W.3d 316 (Tex. 1999):
    In general, only persons authorized by the Constitution or a statute can make a contract binding on the State. See State v. Ragland Clinic-Hosp., 159 S.W.2d 105, 106 (Tex. 1942).  All state officers' powers are fixed by law, and all persons dealing with them are charged with notice of the limitations on those powers. See id. at 107. Only persons having actual authority to act on behalf of the State can bind the State in contract. See id. 
  • Texas Attorney General’s Opinion MW-475:
    Only those obligations which the state agency or university has the constitutional and statutory authority to discharge may be the subject of a valid indemnity agreement by it in favor of others. An indemnity agreement negotiated by a state instrumentality in violation of law is unenforceable and void, although an invalid indemnity clause in an otherwise enforceable contract will not ordinarily invalidate the remainder of the contract.

Notwithstanding expressions to the contrary which are to be found in some of the earlier cases, we think it must now be accepted as the established law in Texas that limitation does not run against the State unless provision for it to do so is made by statute.

 

Subcontracting

Chapter 2161 of our Government Code and related regulations, require us to make a good faith effort to assist historically underutilized businesses (each a “HUB”) in receiving contract awards. The goal of the Texas HUB program is to promote full and equal business opportunity for all businesses in contracting with us. When contracting with us, you also have an obligation to make a good faith effort to utilize HUBs certified by the Texas Comptroller’s Office, when subcontracting any of the goods or services provided to us. The good faith effort obligation continues throughout the term of the contract. Subcontracting by you is subject to reporting and review to ensure compliance with the Texas HUB program.

 

 

Good Contracting Clauses

 

Representations and Warranties by Contractor

This clause asks you to certify that your company is a properly organized business entity permitted to do business with us and that the person signing the contract on your company’s behalf has been properly authorized to do so. We ask for these certifications to protect us from later claims that could hurt our ability to enforce our contract.

 

Venue; Governing Law

The venue clause says that if there is going to be a lawsuit filed to resolve a dispute, it will be handled in a Texas court, using Texas law. We always want our contracts to be governed by our state's laws and handled in a Texas court. Texas laws authorize our agencies and protect the state. We don't have authority to "waive" the protections of Texas law. Texas courts are experienced with interpreting and applying Texas law.

 

Entire Agreement; Modifications

This clause reduces the risk that our actual deal is different from what we wrote in the contract. This clause says that both sides agree the contract we are signing describes the actual deal, and that things we might have talked about or considered, but didn't make it into the final signed document, are not part of the agreement we reached. It also says that if we want to change the agreement, we must do that in a signed writing. This prevents one side from saying that the other agreed to a change in a conversation or other communications.

 

Addendum Controlling

This clause says simply that if one of the issues addressed in the Addendum is also addressed in the body of the contract, the Addendum's way of dealing with the issue will control. In many cases, there will not be duplication because our clauses are unique to contracts with Texas agencies; but for the general "good contracting" clauses, duplication is more likely. For example, many contracts contain venue and governing law provisions. If you attached the Addendum to such a contract, there would be two venue and governing law clauses. Without this "Addendum Controlling" clause, it could be argued that the one in the body of the contract controls. This clause eliminates that argument.

Another way to deal with "dueling clauses" is to identify duplications and simply delete the contract clause and put our clause in its place. You may prefer this approach as "cleaner," although the Addendum controlling approach is easier.