Legal Standpoint: The Vital Responsibility of Reviewing Contracts

By Lawrence White    //    Volume 23,  Number 2   //    March/April 2015

Reviewing contracts is part of every higher education lawyer’s job description, no matter what kind of institution the lawyer represents and regardless of whether the lawyer works in-house or at a law firm. Getting contracts right is an unglamorous but important part of the work we do—a vital responsibility, particularly when the board must approve a contract before it goes into effect.

Contracts come in an infinite variety of forms and levels of complexity. Some contracts are dozens of pages long and comprehensible only to those with specialized knowledge. In this category are food-service contracts, insurance policies, hardware and software licensing agreements, head coach’s contracts, and contracts for the construction of buildings. Other contracts are repetitive and routine. At one university with which I am familiar (not my own), the general counsel’s office uses a database to keep track of the contracts it reviews. In a single year, the office reviewed over 2,000 contracts. That’s 40 every week. Eight every workday.

When lawyers review contracts, their role should be limited. They are not supposed to substitute their judgment on the propriety of business terms for that of the people who will use whatever goods or services are involved. It’s the lawyer’s limited job, in the words of an ofteninvoked mantra, to review the contract for “form and legal sufficiency”—in other words, to ensure that the contract is executed by an authorized official, is free of ambiguities, accurately captures the expectations of the parties, and satisfies all the formal requisites necessary to make it legally enforceable.

What do the institution’s lawyers look for when they review a contract for form and legal sufficiency? In vernacular terms, they imagine that something will go wrong with the contractor’s performance and ask themselves whether the university’s interests would be protected if the contractual relationship unravels.

They look at the term to see how long, under the worst of circumstances, the institution will be stuck in the contractual equivalent of a bad breakup. They review the termination provision to see what the college or university must show or do in order to end the contract before the completion of its term. If the contract term is short (measured in months, for example, rather than years), lawyers are generally willing to accept more restrictive termination rights than would be the case for a long-term contract.

They closely review the risk-shifting provisions, which from the lawyer’s perspective are the most important features in the contract. If the contractor negligently performs (or fails to perform) as the institution had the right to expect, have we waived or released claims against the contractor by means of one of those impossible-to-understand indemnification provisions that has the effect of shifting the risk of contractual nonperformance to us? Is the contractor appropriately insured so that we can file a claim for nonperformance if it comes to that?

Lawyers reviewing contracts are higher education’s analog to the TSA agents who screen luggage at the airport. Our offices review thousands of contracts that never go wrong and for which a lawyer’s attention is by some reckoning an extraneous waste of time. Nevertheless, it is valuable and important for lawyers to look at every single significant contract because we don’t know in advance which one will be that very rare contract that implodes and causes damage.

As a board member or board professional, you will be asked periodically to approve a contract—a large and important one in all likelihood. It behooves the board to have procedures in place to ensure that no contract is presented for board action unless and until legal counsel has reviewed it. In the best of all possible worlds, your institutional procedures will guarantee that a box is checked or a form is executed attesting to review for form and legal sufficiency.

If you are unsure in a particular instance whether a lawyer has reviewed a contract, ask. If counsel have not reviewed and approved it, send it back.

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