Review the following questions to answers to our most frequesntly asked questions regarding contracts:
What is a contract?
Does Meharry allow verbal contracts to be made on its behalf?
Are contracts required for all purchases from vendors – even small ones?
Who can sign contracts on behalf of Meharry?
When does Meharry require proof of insurance from the other party to the contract?
When does Meharry require an indemnity provision in a contract?
Should the other party sign the contract before it is routed?
Usually a contract is formed when one party agrees to do something or provide something to another party in exchange for some other action or object. A contract does not need to be written or formal to be binding. Consider, for instance, if you hire a neighbor’s teenage son to cut your grass. You tell the teenager that you will pay him $20 to cut your grass next Saturday. He shows up on Saturday, cuts the grass, and rings your doorbell to collect his $20. A contract has been formed and you are legally obligated to pay him. If you do not, you are in “breach” of the contract and he can sue you to collect.
Does Meharry allow verbal contracts to be made on its behalf?
No. Meharry policy requires all contracts to be in writing so that the terms are as clear as possible.
Are contracts required for all purchases from vendors – even small ones?
Yes, but Meharry has adopted a Purchase Order system in order to simplify the contracting process for purchases. The Purchase Order is a standard contract issued by the Purchasing Department that sets forth the terms of the purchase from a vendor. The Purchase Order includes the product description, quantity, and price and provides terms that will benefit Meharry if the vendor defaults.
Purchases of expensive supplies or equipment may require an additional contract as well that outlines the product’s warranties, guarantees, and limitation of liability.
Who can sign contracts on behalf of Meharry?
Employees with the rank of Vice-President or higher can sign contracts on behalf of Meharry. All other employees are strictly forbidden from doing so. A contract signed without authority may not be binding upon Meharry and the individual who signed it could be held personally liable for fulfilling the obligations of the contract.
When does Meharry require proof of insurance from the other party to the contract?
Meharry requires proof of insurance whenever the work to be performed under the contract poses any risk of injury to people or property. It does not depend upon the amount of work to be done or the amount to be paid, but rather the nature of the work to be performed. For instance, if Meharry hired a tree service to remove a tree, it could cost relatively little money and would not take long at all.
However, the nature of the work poses a risk to people or property near the tree. If the workers were to make a mistake, the tree could fall on a person or a car nearby and result in serious injury. If Meharry has proof of insurance from the tree service, then we would know that the injured person could recover money from the tree service directly. Otherwise, Meharry would be the only “deep pocket” for the injured person to sue.
The following is a list of the most common types of contracts that require proof of insurance:
- Construction/Renovation
- Landscaping/Tree services
- Independent contractor agreements for physician services
- Locum Tenens agreements
- Transportation services
- Rental contracts for event space
- On-Site Catering services (i.e., excluding boxed lunch catering)
When does Meharry require an indemnity provision in a contract?
Like proof of insurance, Meharry requires an indemnity provision in a contract anytime the work to be performed under the contract poses any risk of injury to people or property. When a party agrees to “indemnify” another party in a contract, it means that it agrees to pay for any damages the that the other party may suffer if it gets sued.
Using the tree service example, if the tree service makes a mistake and the tree falls on a nearby car, the owner may very likely sue both the tree service and Meharry (since Meharry hired the tree service).
If the contract between Meharry and the tree service provided for indemnity, Meharry would know that if the owner’s lawsuit resulted in a judgment against Meharry, the tree service would pay for the judgment. And if Meharry had proof of insurance, it would know that the tree service had insurance coverage to pay Meharry for the indemnity. Thus, indemnity and insurance work hand-in-hand.
Should the other party sign the contract before it is routed?
No, it is better if the other party does not sign the contract before routing. During routing, changes may be made by one of the reviewers that requires initialing and dating by all parties. This is easier to accomplish and is more organized if the other party can sign the contract and initial the changes at the same time.
