Contract Formation Flashcards
What is the purpose of a contract?
Documents the terms and conditions of the agreement to prevent misunderstandings or conflict and creates a legal, binding and enforceable obligation
How do Texas courts define a contract?
As a promise to which the law attaches legal obligation
What conditions of a contract would open it to challenge or voidance?
Award given for requirements that differ from those defined in the solicitation or violating ESBD posting requirements
What does contract law not allow?
Adding terms to the contract that are not part of the original contract without consent of both parties
What is the primary concern for the State in balancing conflict of interests in contracts?
Benefit of the contract as a whole to the State and specifically, the taxpayers
What care should be taken when negotiating contracts in the best interest of the State?
Not to include unnecessarily harsh provisions in the contract because contractors may feel aggrieved, more apt to engage in legal action, and less likely to bid in the future
What are the essential legal elements of a contract
Offer- manifestation of the willingness to enter into a bargain
Acceptance- manifestation to the assent of the terms- cannot change the terms of the offer
Legal purpose- objective must be legal
Consideration- mutuality of obligation- each party receives something and make binding promises
Certainty of subject matter- terms well defined to make contract enforceable
Competent parties- competent and authorized to enter into contract
What does a material change in a proposed contract constitute?
A Counteroffer, which must be accepted by the other party for there to be a binding contract
If only 1 party makes a promise, is this consideration?
No, the promises must be by both parties that depend on each other, so each party receives something as consideration.
Also a consideration can be a promise NOT to do something
Does the lack of certainty of subject matter (well defined terms) void a contract?
Not typically, Texas courts prefer to validate transactions rather than void them but courts cannot insert or eliminate essential terms
Can a contract include a provision to reach an agreement on an essential term? Give an example.
No, the amount of monthly rent could be an essential term. If the contract says that the parties will agree on that amount, the court cannot order them to agree.
Give examples of essential and non-essential terms related to a lease agreement
Location and amount of lease- essential
Method of payment- non-essential but best practice to include
What are the essential provisions/contract terms of every contract
1) Terms necessary for binding contract
* terms that address scope of work,
* price and payment terms,
* contract term (length)
* termination provision (Must have non-appropriations termination clause)
* identification of contracting parties
2) Texas Required Contract Clauses
What is the most effective means of protecting agency from unintended risk?
Clearly stated terms and conditions
What are contract termination provisions?
1) Termination by mutual agreement
2) Termination for convenience (no fault termination)
3) Termination for cause- party has failed to perform or make progress or breached the contract)
4) Termination for non-appropriation
What are alternatives to termination for cause?
Cure notice- specifies a period of time to correct the deficiency
Corrective Action Plan- identifies activities that must be performed to restore compliance
What is the primary objective of every contract award?
Obtain best value for the state
What form can the contract be in?
PO or a formal signed agreement
If a formal agmt is used, the PO documents the encumbrance of funds
For what procurement methods are negotiations permitted?
RFP RFO TXMAS purchases State Use (for services NOT goods) DIR Cooperative Contracts Consulting and Professional Services Sole source and competitive proprietary Emergency purchases
What procurement method is negotiation NOT permitted?
IFB, unless only 1 qualified bid received
Because cost is the main factor for IFB
How does an “unlevel playing field” occur in negotiations with state governmental entities?`
1) If the procurement objectives are changed
2) when the composition of the eligible vendor pool would have been different, if changed objectives had been part of solicitation
What are negotiation team best practices?
1) Select members with effective communication and negotiation skills
2) Lead negotiator should be appointed (should consider a SME)
3) Include/exclude members based on SME, leadership style, negotiation skills, decision making authority
What should the Contract Developer do so negotiations are well-prepared?
Engage in formal planning activities with the negotiation team so you
Know prevailing prices, supply conditions
Know critical contract terms
Know settlement range
What should formal negotiation planning include?
1) identifying contract terms that are crucial (unwilling to compromise)
2) Prioritizing acceptable trade-offs
3) establishing settlement range
4) anticipate positions that will be taken by vendor
