Western Carolina University

What is a contract?

Although this might seem like a simple question, there is a great deal of misunderstanding about what is and is not a contract. People tend to be misled by the title of a document into thinking it is not a contract when, in fact, it is. For example, and "agreement," a "memorandum of understanding," a "settlement," a "lease,", etc. may all create legally binding contracts even if the word "contract" never appears in the document.

    Any communication may create a contract if it has three things:

1. an offer to provide a good or service, or a promise to do something or to refrain from doing something
2. an acceptance of the offer, and
3. "consideration", i.e., the exchange of something valuable (money, work, mutual obligations, etc.)

Does a contract have to be in writing to be enforceable?

Contrary to popular belief, as a general rule, the answer is "no." A verbal agreement can create a legally binding contract. However, as a practical matter it may be hard to prove the existence or terms of the contract in case of a dispute unless there were witnesses to the parties' conversations.

As a matter of good practice, all contracts should be written and all University contracts must be put in writing.

What is a 'University contract'?

Contracts that obligate the University's resources or personnel in any way are "University contracts." In general, agreements are not University contracts if they are entered into on behalf of a foundation (including those affiliated with the University), a student organization, or purely private interests. If there is any question about whether an agreement qualifies as a University contract, please contact the University Legal Counsel.

Can you give me some examples of University contracts?

The kinds of contracts are extremely varied; however, some typical examples include:

• Instructional and internship agreements
• Agreements with hotels and conference centers
• License agreements for plays and musicals
• Agreements with independent contractors
• Articulation agreements
• Event contracts
• Agreements for the use of University facilities
• Residence Hall contracts
• Nondisclosure agreements
• Memorandums of understanding
• Mutual Aid agreements
• Personal service/consulting agreements
• Construction contracts
• Research Contracts

Does WCU have a policy about University contracts?

Yes. University Policy #62 defines contracting authority within the University.

Who is authorized to negotiate and sign contracts that bind WCU or its units?

The contracting policy states that only the Chancellor has the authority to contract for the University unless authority is delegated elsewhere by University Policy #62.

Anyone else who enters into a contract that purports to bind the University or its subunits is acting without authority and can be held personally liable for the contract.

Are there certain things that cannot appear in the University contract?

Yes. The North Carolina Attorney General has determined that the following types of contract clauses are prohibited:

1. Limitations to the contractor’s liability for nonperformance. When a contractor fails to perform its obligations under a contract, it can be sued for damages. Sometimes a contractor will try to put language in a contract that limits the damages owed the university in the event that the contractor fails to perform. Such language is prohibited.
2. Hold-harmless or indemnification clauses in favor of the contractor. These clauses generally provide that the University will pay money to the contractor in the event that the contractor is injured in the performance of the contract by a party for whom the University is not normally responsible. The clauses normally are clearly labeled as hold-harmless or indemnification clauses. They appear often in contracts. Contractors that do business regularly with state entities are used to having these clauses deleted from their form contracts.
3. Acceleration clauses rendering all payments by the University under the instant and all other contracts between the parties due upon the contractor’s finding of default by the University under the instant contract.
4. Waivers of the limits of the University’s liability established by the North Carolina Tort Claims Act.
5. Clauses rendering the contract subject to the laws and the legal forums of a state other than North Carolina. These clauses appear often in contracts. Most contractors that do business with state entities are used to having these clauses deleted from their form contracts.
6. Clauses that alter the North Carolina general law of contracts, such as reducing the time in which to bring a suit for damages otherwise allowed by the North Carolina statute of limitations.
7. Binding arbitration clauses.
8. Clauses authorizing the contractor to assign the right to receive payment from the University under the contract while raising a bar to assertion against the assignee of counterclaims and other defenses with respect to the assignor’s deficient performance or nonperformance.