Required Contract Clauses
Reference Materials


(Revised 8/11/2011)

Introduction

Our standard Addendum contains several clauses: some constitute "good contracting" practice and others are explicitly required by our state's laws or included to enable us to comply with provisions of the law.

These clauses are examples of "good contracting:" Representations and Warranties by Contractor; Venue; Governing Law; Entire Agreement; Modifications; and Addendum Controlling. They protect our interests by raising issues of general concern such as whether the Contractor is a business in good standing and has given the person who will sign the authority to do so on its behalf and bind it to the agreement; where the parties will file lawsuits if they ultimately have a dispute they can't otherwise resolve; making sure that everyone understands that the agreement contains all the terms of the transaction and that things that may have been discussed but did not make it into the final executed agreement are not part of the deal, among others.

The Family Code Child Support Certification and Breach of Contract Claims clauses are explicitly required by our state law to be included in our contracts in exactly the language set forth in the Addendum.

Finally, we include the Loss of Funding, Tax Certification, Payment of Debt or Delinquency to the State of Texas, Access by Individuals with Disabilities, Notices, Limitations, Ethics Matters, No Financial Interest, State Auditor's Office and Subcontracting clauses in order to enable us to comply with requirements imposed on us by specific provisions of our law.

Your vendor may well prefer not to include some of these clauses; however, vendors will have to try to understand that 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. Furthermore, the policies underlying the laws represent the judgment of the people of this state that it should conduct its 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, vendors are usually willing to accept them.

Most 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. Please feel free to provide vendors with whom you are negotiating a copy of this document or its url. If you are unable to secure a vendor's acceptance of the clauses that apply to your contract, you may consult with the Office of General Counsel (OGC).


Good Contracting

Representations and Warranties by Contractor

This clause asks the vendor to certify that it is a proper corporation or other business entity permitted to do business with us and that the person who is going to sign the agreement has been properly authorized by the company to do so. We ask for these certifications to protect ourselves from claims later on that could hurt our ability to enforce our contract. For example, we don't want the vendor to be able to say that the person who signed wasn't authorized to do so. If a person isn't authorized to sign, a company may argue that that person can't bind the company and the company can simply refuse to perform its obligations under the 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 law because the law contains many provisions that protect the state. If another state's law governs the contract, our protections may not apply. For example, we limit our liability for tort claims and indemnification to a certain dollar amount. If our state laws don't apply, those limits may not apply and the state could be open to unlimited liability. Technically, we don't have the authority to "waive" these protections by letting other state's laws apply. If we did have this authority, the laws would have almost no value because they could be circumvented by the simple act of letting another state's laws apply in a contract.

Entire Agreement; Modifications

This clause protects us from claims that the actual deal between the parties was different from what they wrote down in the contract. No one wants to have to contend with that kind of claim later on, so this clause says that both sides agree that the deal they are signing is the actual deal and things they might have talked about or considered, but that didn't make it into the final signed document, were not part of the agreement they reached. It also says that if the parties want to change the agreement, they have to do it in writing. This prevents one side from saying that the other agreed to a change in a conversation.

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 most cases, there won't be duplication because our clauses are unique to contracts with Texas agencies; but for the general "good contracting" clauses, there is quite likely to be duplication. For example, many contracts contain a clause about governing law and venue. 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 such 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.


Required Clause

Child Support Certification

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


Compliance Clauses

Loss of Funding

Normally, we would not enter into an agreement that obligates us to spend money we aren't pretty sure we will have, but 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 to cover. While it is certainly our intention to get the funds to continue such projects, we are not capable of promising that we can do so. We include this clause to give ourselves the ability to get out of a contract we can't fund.

Franchise Tax Certification

Section 2107.008 of our Government Code does not explicitly require that we put a clause about franchise taxes in our contracts, but it says that we cannot pay a vendor who is delinquent in paying state franchise taxes. We have to determine whether a vendor is delinquent, to keep from violating this law, and a certification that says the vendor is not delinquent helps us comply with Section 2107.008.

Payment of Debts to State of Texas

The requirement for this clause is somewhat complicated. Technically, Sections 2107.008 and 2252.903 of our Government Code only require us to include this clause in contracts with persons whom the state 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 vendors 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.

State Auditor's Office

The Texas State Auditor's Office may conduct an audit or investigation in connection with procurements made by institutions of higher education as set out in Sections 51.9335(c), 73.115(c) and 74.008(c), Texas Education Code. This provision is included in our contracts to (1) put your vendor on notice that the State Auditor may require the vendor to provide records related to the procurement; and (2) to be sure that the vendor notifies any permitted subcontractors of the same information.

Access by Individuals with Disabilities

Chapter 2054, Subchapter M of the Texas 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 Texas state agencies to be accessible by individuals with disabilities. Such DIR accessibility rules are set out in Title 1, Rule §206.70 of the Texas Administrative Code and in Title 1, 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 a University contractor complies with such DIR accessibility rules.

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

  • information resources and any equipment or interconnected system or subsystem of equipment that is used in the creation, conversion, or duplication of information resources, or

  • 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, the “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. The following are examples of such equipment:

  • 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.

(Section 2054.451 of the Texas Government Code; Subsections (5) and (7) in Title 1, Rule §213.1 of the Texas Administrative Code.)

Subcontracting

Chapter 2161 of our Texas 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, the vendor also has an obligation to make a good faith effort to utilize HUBs certified by the Texas Procurement and Support Services Division of the Texas Comptroller’s Office, when subcontracting any of the goods or services provided. The good faith effort obligation continues throughout the term of the contract. Subcontracting by the vendor is subject to our review to ensure compliance with the Texas HUB program.

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