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Vendor Contracts: Be Careful Before You Sign On The Dotted Line

9.5.17

It’s the first week back to school and you receive the following three phone calls in quick succession:

Awareness Is The First Step

There is no question that entering into vendor contracts is an everyday necessity for independent schools across the nation. Examples of some of the more common contracts include those for food services, maintenance, after-school programs, multimedia content, curriculum resources, and marketing. The first step to ensuring your school enters into fair and equitable contracts is simply to be aware of them. Your administration must be informed of the contract’s existence before execution so you have the opportunity to negotiate beneficial terms and the agreement can be vetted by legal counsel, if necessary. 

While this may seem obvious, every school administrator can probably relate to one of the examples set forth above. Therefore, your school should create a policy designating a short list of personnel authorized to negotiate, review, and execute contracts that create obligations or confer benefits on the school. Your list should include individuals with high-level knowledge of your school’s operations, insurance coverage, and financial standing. Your policy should also detail the circumstances under which the designated personnel must seek Board authorization; for example, to delineate a monetary or term length threshold.

Education Is Key

Once developed, it is critical to take affirmative steps to disseminate and implement your policy. First and foremost, it is imperative to train your administrators and employees regarding the parameters for entering into contracts on behalf of the school. Aside from formal training, the policy should be distributed and communicated throughout the year via handbook, bulletins, and meetings. Further, vendors should be put on notice as to who is authorized to bind the school, and that any contracts entered into by unauthorized personnel will be immediately disavowed. Finally, you should caution your employees that they may be personally liable for unauthorized contracts.

A Master List Is Essential

Another useful tool to keep a handle on your obligations is a master list of vendor agreements. It should include vendors’ contact information, services to be rendered, critical dates and deadlines, proof of insurance and license, and the person within the school designated to ensure compliance. This allows your administration to understand all of your contractual obligations by viewing one document. All original contracts should be maintained by one assigned person, such as the Chief Financial Officer or Business Manager.

Negotiation Points

Just as important to the process is ensuring the terms are equitable and beneficial to your school. Some provisions that should raise a red flag include:

Conclusion

Contracts are serious documents with broad legal and financial implications. Therefore, it is important to ensure that your school is properly equipped to proactively navigate the process. Adopt a policy, aggressively implement it, negotiate sound terms, keep good records, and know when you are in over your head.

For more information, contact the author at AKofman@fisherphillips.com or 954.525.4800.

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