Some Important Things About ContractsAbout Contracts

Service + Solutions = SuccessService + Solutions = SuccessMark F. O’Donnell

Founding Member, Seattle

Seattle: Portland: Anchorage:Seattle:901 5th Ave. Ste 3400Seattle, WA 98164P: (206) 287‐1775F: (206) 287‐9113

Portland:222 SW Columbia Ste 1575Portland, OR 97201-6615

P: (503) 224-3650F: (503) 224-3649

Anchorage:310 "K" St., Ste 200Anchorage, AK 99501P: (907) 274‐1544F: (907) 276‐5291

Preg O’Donnell & Gillett PLLCPreg O Donnell & Gillett PLLCAreas of Practice

• School Law• Business Litigation• Construction Defects, Dis utes, In uries and Pro ect p j j

Safety• Errors and Omissions/Professional Liability• Hos italit Liti ationp y g• Insurance Defense Litigation• Maritime• Product Liabilityy• Representing Employers in WISHA Matters• Toxic Tort/Asbestos Litigation• Trans ortation and Truckin Liti ationp g g

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Mark F. O’D ll

Mark O’Donnell has practiced law since 1983 and is a founding member of Preg O'Donnell & Gillett. O’Donnell g

Mark O'Donnell's practice is devoted principally to the resolution of insurance-related matters. Typically, he handles cases involving ersonal in ur or death roduct liabilit pro ert dama e remises p j y , p y, p p y g , p

liability, construction site injuries, construction deficiencies, and school liability. Mark is an experienced litigator. He has attended the National Institute of Trial Advocacy and successfully tried and arbitrated man cases. Mark has the hi hest ratin ossible from y g g pMartindale-Hubbell, (AV).

Mark has been on the approved counsel list for the Washington Schools Risk Mana ement Pool since 1990. He has successfull g yhandled in excess of 300 cases to date. Mark has represented more than 40 school districts in Washington.

Mark has handled cases dealin with issues such as h sical assault, g p ysexual assault, athletic injuries, defamation, weapons, injuries occurring on school premises or with school-furnished equipment, injuries occurring during school-sponsored activities, bus accidents, ne li ent hirin , trainin or su ervision, and ro ert dama e.g g g g p p p y g

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Types of Contracts in the School WorldTypes of Contracts in the School World

• Construction → There is no one‐size fits ll• Facilities use

• Maintenancek

all solution

→ What you use for • Small works• Vendor agreements• Field trips

construction/maintenance is going to be different from what you use for facilitiesField trips

• Service provider contracts• Equipment leases

what you use for facilities.

→ A $1,000 contract is i b• Purchase orders

• Value ranges from $500 to$5 million

probably going to be different from a $100,000 contract$5 million. 

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What is a Contract?What is a Contract?• An agreement, upon sufficient consideration, to do or not to do a particular thing. 

• A covenant or agreement between two or more persons, with a lawful consideration or cause.

• A deliberate engagement between competent i id i dparties, upon a legal consideration, to do or abstain 

from doing, some act.Th iti hi h th t f ti• The writing which contains the agreement of parties, with the terms and conditions, and which serves as a proof of the obligationproof of the obligation. 

Black’s Law Dictionary Definitions5

Elements of a ContractElements of a Contract

• Offer ‐ details what will be provided• Acceptance ‐ a reein  to the offer p g g• Consideration ‐money or something of value exchanged between the parties (including aexchanged between the parties (including a promise to do or not to do a certain thing)

• Capacity of the parties to contract• Capacity of the parties to contract• Legally enforceable terms and conditions, 

l ll d bj f halso called object of the contract6

Essential terms of a contractEssential terms of a contract• A contract should be in writing. • At a minimum, contracts should identify: who, what, when, where, and how much.what, when, where, and how much.

• You should have enough information for a court arbitrator or third party to be able tocourt, arbitrator, or third party to be able to enforce the contract: 

What do you reasonably expect?– What do you reasonably expect?– What is essential?Wh i– What is your benefit?

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Contract Do’sContract Do s• Review, know, understand your contracts. 

– Make sure the people who use the contracts know– Make sure the people who use the contracts know, understand, and review the contracts.

– Read the boilerplate• Consider a “repository” of contracts where you keep all the various types of contracts in one location– Periodically update your contracts– Periodically update your contracts– Use the right type of contract

• Have consistency between and among contractsg• Consider: insurance, indemnity, risk allocation, attorneys’ fees. 

• Have a dollar value beyond which requires a set of eyes8

Contract Don’tsContract Don ts

• Don’t allow performance to begin unless youDon t allow performance to begin unless you have the contract signed

• Be careful of vendors’ contracts• Be careful of vendors  contracts• Be careful of lengthy “master agreement”‐type contracts

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•VENDORS’ CONTRACTS•VENUE PROVISIONS•ON‐SIDED LANGUAGE•CHANGES/CHANGE ORDERS

CONTRACT RED FLAGS

CHANGES/CHANGE ORDERS•ATTORNEYS’ FEES

CONTRACT RED FLAGS

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VENDOR CONTRACTSVENDOR CONTRACTS

• Contract terms usually favor the person writing theContract terms usually favor the person writing the contract. – If a vendor gives you a contract to si n  this is a g y g ,red flag. Review the contract with a critical eye. 

– Before you sign, verify and clarify the terms so y g y ythat they are fair to your district. 

• You can ask to negotiate, strike, and re‐write terms. • Or, you can try to counter by presenting your own contract 

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VENUE PROVISIONSVENUE PROVISIONS

• Often contained in “disputes”, “choice of law; jurisdiction,” “law and forum for disputes,” “governing law,” or “general” provisions. 

• These terms set (1) which jurisdiction’s laws apply, d h di k land (2) where any dispute resolution takes place.  

They are often exclusive for any contract disputesrelating to or arising out of the contractrelating to or arising out of the contract. 

• Be cautious signing any agreement where the choice of law is outside of Washington stateof law is outside of Washington state. 

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VENUE PROVISIONS:sample

“Washington state law governs the interpretation ofWashington state law governs the interpretation of this contract and applies to any claims related to or arising out of this contract, regardless of conflict of g , glaws principles. The parties irrevocably consent to the exclusive jurisdiction and venue of the state or federal courts in King County, Washington, for all disputes arising out of or relating to this contract.”

Note: this clause should include references to specific dispute resolution process if the parties choose to include disputeresolution process, if the parties choose to include dispute 

resolution provisions in the contract.13

ONE‐SIDED LANGUAGEONE SIDED LANGUAGE

• Be cautious of any terms that allow one party to do• Be cautious of any terms that allow one party to do something unilaterally or exclusively. – One‐sided dispute resolution: choice of arbitrator, choice of p ,forum

– No damages for delays by one party– Schedule of work, coordination of work with others– Termination or change order provisions that allow the vendor to cancel or change any aspect of the contractvendor to cancel or change any aspect of the contract without bargaining and agreement

– Broad indemnification of the vendor without indemnification of the district. 

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ONE‐SIDED LANGUAGEONE SIDED LANGUAGE

• One‐sided language always favors vendors• One‐sided language always favors vendors.

• Look for phrases like “in our sole opinion” or “exclusive option”“exclusive option” 

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CHANGE ORDERSCHANGE ORDERS

• These clauses are often one‐sided• These clauses are often one‐sided.• They should provide for mutual review and agreementagreement. 

• Look for words or phrases like “we reserve the right to adjust the price of our service” or “maketo adjust the price of our service  or  make modifications” without prior agreement by all parties 

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CHANGE ORDERS:the right to amend the contract

• Consider whether you might want to amend the contract in the future. 

• What circumstances trigger amendment?• What is required to amend the contract?• What is required to amend the contract?• Can the vendor/contractor amend the 

?contract?

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Change Orders:sample modification clause

• “Modification of Agreement. This Agreement may be supplemented, amended, modified, or y pp , , ,changed only by the mutual agreement of the parties. No supplement, amendment, p pp , ,modification, or change of this Agreement shall be binding unless it is in writing and g gsigned by all parties.”

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Changes: substitution of goods and servicesit i iti• Require it in writing

• Is it ok for the vendor to give you generic items?

• Do you want services by a specific person?• What happens if the manufacturer discontinues a particular item or comes updiscontinues a particular item or comes up with a “new and improved” version of the item you purchased?item you purchased? 

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IMPORTANT CONTRACT PROVISIONSIMPORTANT CONTRACT PROVISIONS: 

• Insurance: minimum amounts, additional insured

• Risk Allocation: indemnity provisions• Right and how to terminate a contract• Right and how to terminate a contract• Dispute Resolution Provisions• Attorneys’ Fees

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Risk Allocation:What happens when something goes wrong?

• Consider:I– Insurance Requirements

– Additional Insured Endorsements– Indemnity, hold harmless, duty to defend

• Who is responsible for what and whenp

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Risk Allocation:Risk Allocation: Insurance Example

• The Contractor must obtain and maintain current throughout the term of this agreement a risk insurance policy with a 

bl i A M B Fi hreputable insurer, having an A. M. Best, Fitch, Moody’s, or Standard & Poor’s rating of A‐ or better, in which the School is indemnified in an amount not less than $2 million for any claims whatsoever (including injury to persons or damage to property) arising out of any activities related to this contract. 

• This contract will not take effect without proof of policy or a• This contract will not take effect without proof of policy or a certificate of insurance produced to the School. 

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Risk Allocation:Risk Allocation: Strengthen the Insurance Clause with 

an Additional Insured Provision

• “The risk insurance policy shall name the School as an Additional Insured under the policy ”an Additional Insured under the policy.

• This clause generally furnishes coverage to the District as an additional insured by adding theDistrict as an additional insured by adding the District to the contractor’s insurance policy. 

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Risk AllocationRisk Allocation: Strengthen the Insurance Clause by Designation of Primary Insurance

• “Contractor(s) and the School agree that any insurance policies procured by Contractor(s) that provide benefits or protection for the School shall be primary and that any policies procured by School that might happen to provide protection or benefitsthat might happen to provide protection or benefits to the School arising out of User’s use of the School premises shall be excess.”premises shall be excess.

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Risk Allocation: “Indemnification” and “Hold“Indemnification” and “Hold 

Harmless”• A hold harmless clause or agreement is an 

f lagreement to pay for any expenses, losses, or damages from a third party’s claim. 

• Indemnity is sometimes construed more narrowly as reimbursement for damages. 

• When in doubt, use both. 

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Risk Allocation: Contractual Duty to “Defend”

• A contract term that specifies that a party has a duty to defend another means that the party with the duty to defend must provide (and pay for) a legal defense to claims made by a 3rd party against the hother. 

• Consider adding a provision supporting this duty to ith l th t “thi tdefend with a clause stating that “this duty to defend 

includes the duty to provide a defense by a lawyer agreeable to the District ”agreeable to the District.

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Risk Allocation: IndemnificationScope of indemnification – employee immunity

District A District B

• Both contracts contain indemnification and immunity for “the District, its agents, ffi dofficers, and employees”

Use this language to protect your employees, officers, administrators volunteers consultants and boardadministrators, volunteers, consultants, and board members

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Risk Allocation: IndemnificationExample of Bargaining for Specifics

District A – weak indemnification District B – strong indemnification

• Two school districts• Same transportation vendor• Different indemnification language creates very different results

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Risk Allocation: IndemnificationExample of Bargaining for Specifics

District A – weak indemnification District B – strong indemnification

Indemnification applies to: “Any injury to person or

“Contractor’s obligation to indemnify defend or holdAny injury to person or

property … however caused, excepting the case of the District’s negligent act or

indemnify, defend, or hold harmless shall not be eliminated or reduced by any actual or allegedDistrict s negligent act or

omission, or willful misconduct 29

any actual or alleged concurrent negligence by the District”

Risk Allocation: IndemnificationRisk Allocation: Indemnificationstatutory limits of indemnification in RCW 4.24.115

• RCW 4.24.115 applies to … contracts relative to the construction, alteration, repair, . . . improvement to, or maintenance of any improvement attached to , y preal estate including architecture, surveying, and transport of materials and property. 

• Any indemnification for a contractor’ sole• Any indemnification for a contractor s sole negligence is void and contrary to public policy. RCW 4.24.115. Th i bli ti f t b• The indemnity obligation of defense must be specifically limited to the contractor’s negligence or the separate indemnity obligation of defense will be 

idheld void.30

Risk Allocation: IndemnificationModel Contract for RCW 4.24.115 Contracts

The Contractor owes noindemnity duty if the harm was caused by or results yfrom the sole negligence of the Owner

In the event of concurrent negligenceIn the event of concurrent negligence . . . the Contractor’s indemnity duty is valid and enforceable only to the extent of the ne li ence of the Contractor

Model construction contract from the WA State Bar Assoc31

g g

Risk Allocation: Indemnificationti t ifi ll ti t thparties must specifically negotiate the workers’ 

compensation bar for RCW 4.24.115 Contracts

• For purposes of the foregoing indemnification provision only, and only to the extent of claims against Contractor by Owner under such indemnification provision, Contractor specifically waives any immunity it may be granted under the Washington State Industrial Insurance Act, Title 51 RCW. TheWashington State Industrial Insurance Act, Title 51 RCW. The indemnification obligation under this Contract shall not be limited in any way by any limitation on the amount or type of damages compensation or benefits payable to or for any thirddamages, compensation or benefits payable to or for any third party under workers compensation acts, disabilities benefit acts, or other employee benefit acts. 

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Model construction contract from the WA State Bar Assoc.

Risk Allocation: Indemnificationindemnification for WISHA violations 

for RCW 4.24.115 Contracts

• “Contractor agrees to defend, indemnify, and hold Owner f ll hharmless from all WISHA or other related claims, demands, 

proceedings, violations, penalties, assessments, or fines that arise out of or relate to Contractor’s failure to com l  with any p y ysafety‐related laws, ordinances, rules, regulations, orders, or its obligations hereunder.”

Model construction contract from the WA State Bar Assoc

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Model construction contract from the WA State Bar Assoc.

Risk Allocation:Risk Allocation: Survival of the Duty

• A contract term that states that the duty to indemnify, hold harmless, or defend a party may extend beyond the expiration or termination of the agreement or contract. 

• You may choose to include this or exclude it. – Benefits: it could protect the District from a tort claim filed 5 ft th f th5 years after the expiration of the contract 

– Drawbacks: it could increase the District’s liability if the District has a duty to defend the vendory

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Right to Terminate a ContractRight to Terminate a Contract• Define what things that are a basis for termination of the contract

• When does it end? – Does it end on a particular date, after a set number of installments, “whenever someone wants to end it,” or when the work is “finished”?when the work is  finished ?

• Who gets to decide when the contract is over?– Impossibility?Impossibility? – Bad performance by the contractor?

• How is termination effective? (In writing, signed and ( g, gdelivered via U.S. Mail?)

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Dispute Resolution:ptaking care of disagreements before they happen

• What happens when the parties disagree about the meaning or performance of the contract?g p

• Can you make the contractor/vendor mediate the claim? 

• Do you want to force mediation or arbitration?• Who  a s the fees for the dispute resolution?p y p

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Dispute Resolution:pSpecific Arbitration Questions to Consider

• Where should the arbitration take place?• Who chooses the arbitrator?Who chooses the arbitrator?

– Do you want to require a panel or a single arbitrator?

– What are the arbitrator’s qualifications?• Do you want costs and fees to the prevailing party?Do you want costs and fees to the prevailing party?

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Dispute Resolution:pSample Arbitration Clause

• Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration. The arbitration hearing shall take place in _city__, WA before an arbitrator who shall be selected and mutually agreed upon by the partiesbe selected and mutually agreed upon by the parties. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdictionmay be entered in any court having jurisdiction thereof. 

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Attorneys’ FeesAttorneys  Fees

• Attorneys’ fees are generally only recoverableAttorneys  fees are generally only recoverable if authorized by a statute or provided for by a contractcontract. 

• RCW 4.84.330 states that where a contract specifically provides for attorneys’ fees tospecifically provides for attorneys  fees to enforce the provisions of the contract, the prevailing party shall be entitled to reasonableprevailing party shall be entitled to reasonable attorneys’ fees in addition to costs and necessary disbursementsnecessary disbursements

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Attorneys’ Fees:Sample Provision

• “Attorneys' Fees. The prevailing party shall have the right to collect from the other party its reasonable costs and necessary disbursements and attorneys' fees incurred in enforcing this Agreement.”– Reasonable fees include filing fees, court reporters, and service fees. 

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MISCELLANEOUS PROVISIONSMISCELLANEOUS PROVISIONS

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Electronic Signatures and WritingsElectronic Signatures and Writings

• Chapter 19.34 RCW Washington Electronic Authentication Act– A digital signature is a mathematical technique used to validate the authenticity and integrity of a message, software, or digital document.software, or digital document. 

– A message is as valid, enforceable, and effective as if it had been written on paper, if it bears a verified and valid digital signature. RCW 19.34.320 

– A digitally signed message shall be deemed to be an original of the message RCW 19 34 330original of the message. RCW 19.34.330

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Electronic Signatures and WritingsElectronic Signatures and Writings

• How do you get a digital signature?– Schools may subscribe to a certificate issued by a licensed 

tifi ti th it f f ffi i lcertification authority for purposes of conducting official public business with electronic records. RCW 19.34.231. 

– The Secretary of State is responsible for licensing y p gcertification authorities that issue digital certificates. The Secretary does not issue them. The office does maintain a list of licensed certified authorities who will issuelist of licensed certified authorities who will issue certificates. 

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FERPA IssuesFERPA Issues• The Family Educational Rights and Privacy Act (FERPA) (20 § 1232 34 CFR P 99)(FERPA) (20 U.S.C. § 1232g; 34 CFR Part 99) protects the privacy of student education 

drecords. • The law applies to all schools that receive funds under an applicable program of the U.S. Department of Education. 

• The District should ensure that the contractor understands and agrees to abide by FERPA g yrulings and protect student privacy. 

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Contact with MinorsContact with Minors• Washington law requires contractors who h hildhave regularly unsupervised access to children to be fingerprinted for a background record 

RCW 28A 400 03check. RCW 28A.400.303.• The District may contract for a provision requiring contractors to fulfill this requirement, including payment for background checks. RCW 28A.400.303(1). 

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Audit and RecordkeepingAudit and Recordkeeping• Is the contractor aware that any payment 

d b bj di b hrecords may be subject to audit by the Washington State Auditor’s Office?

• Is the contractor aware that any contracts or communications with the school may be subject to PRA disclosure?

• The District may require the contractor to y qadhere to recordkeeping requirements including inspection and copyin . g p py g

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Training Requirements: HIB, Title IX FERPA mandatory reportingIX, FERPA, mandatory reporting, 

and district policiesp• School districts should provide any necessary training to any contractors volunteerstraining to any contractors, volunteers, coaches, and staff. 

• These are some issues that these individuals need to know but may not consider in other 

lcontract situations: HIB, Title IX, FERPA, mandatory reporting, and other district 

lpolicies.47

SPECIFIC CONTRACTSExamples of types of contracts with specific requirements: 

SPECIFIC CONTRACTS

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How to Improve dVendor Service Contracts:

execute the contractexecute the contract• In a take it or leave it situation, you have to 

k h ffdecide whether to take the terms as offered or walk away. 

• If your current provider won’t make any changes, speak to the alternative vendors you have spoken to, who might be more inclined to be more flexible to get your business

• Send your notice of cancellation on time. 49

Software Licensing AgreementsSoftware Licensing Agreements

• Schools are subject to the licensing agreements that they purchase. – Cautionary Tale: In 1998, the LA Unified School District settled a software piracy claim by Mi ft f $300 000 Th ttlMicrosoft for $300,000. The settlement required the district to pay $1.5 million over 3 years to find and eliminate unauthorized software and trainand eliminate unauthorized software and train district staff and students on piracy. 

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Software Licensing AgreementsSoftware Licensing Agreements

• Software licensing contracts should cover the basic• Software licensing contracts should cover the basic terms and spell out the following software‐specific issues:– Proprietary rights and dissemination over content (who can share what information with whom)

– Student data protection provisions– Products, services, and supportWh t h t th i f– What happens to the school’s data in case of termination of contract?

– Liability for data breachesy

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Consulting Agreements:Consulting Agreements: • What is the fee agreement? If it is not a flat fee, isWhat is the fee agreement? If it is not a flat fee, is there a cap?

• What about reimbursements for travel and other expenses?

• Does the consultant need a license or valid certificate?

• Does the contract specify contractor status, including payment and withholdings for any tax or benefits?

• Have you screened the consultant for safety and compliance?

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Consulting Agreements:Consulting Agreements: • Are there specific compliance requirements (forAre there specific compliance requirements (for federal grant monies, performance measures)?

• What records will the consultant keep?p– Remember FERPA, HIPAA, and PRA requirements. – Do these records belong to the consultant or the district?

• What technical assistance does the consultant need?• Is there a fee‐sharing agreement with another agency? Do you need a supplemental contracT?

• Who is the district contact and supervisor for the consultant?

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Facilities Use Agreements: BasicsFacilities Use Agreements: Basics

• Each facilities use agreement should specifyEach facilities use agreement should specify the parties, activities, dates, times and premises and includes restrictions on use andpremises, and includes restrictions on use and activities. 

• The agreement should be signed prior to any• The agreement should be signed prior to any facility use.I d• Insurance, indemnification, and hold harmless clauses should be included. 

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Facilities Use Agreements: other issues

• What equipment will the school supply?• Who will do the set‐up?• Who will do the cleanup?• Who is responsible for inspecting and ensuring that the facility does not contain any hazards?

• When and how will the user notify the school of any accident involving bodily injury or damage to property?

• What activities are prohibited?55

Thank you!Thank you!

Service + Solutions = SuccessService + Solutions = SuccessMark F. O’Donnell

Founding Member, Seattle

Seattle: Portland: Anchorage:Seattle:901 5th Ave. Ste 3400Seattle, WA 98164P: (206) 287‐1775F: (206) 287‐9113

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