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Policy

Introduction

In order to be clear about the intent of both the College and other parties with whom the College enters into relationships, written contracts are frequently necessary. Well-executed written contracts clarify and define the agreement between the parties and protect against unnecessary risks to the College’s resources and reputation. This policy provides guidance for the development and use of written contracts, describes situations for which they are required, and identifies exceptions to those requirements.

Contract Definition

Under this policy, a contract is an agreement between Smith and another party that is intended to have a binding obligation and/or legal effect. Contracts contain the terms and conditions under which goods, services, or other considerations of value are furnished by either party. Effective contracts provide a common understanding of the essential terms and mutual obligations defined within the agreement that exist between the parties. In addition to formal documents commonly understood to be contracts, documents such as purchase orders, service agreements, leases, and letters or memoranda of agreement, understanding, and intent are contracts if there is a College interest at stake and something of value is exchanged.

Applicability of the Policy

This policy applies to all agreements between Smith College and any other party, with the following general exceptions:

  1. Employee contracts (see the Staff Handbook and Faculty Handbook employment policies).

  2. Contracts involving financial aid and student loans.
  3. Contracts regarding academic matters that do not involve the receipt or expenditure of funds are not required, but they are encouraged particularly when liability issues could arise through the agreement. If a contract is written for these purposes, it will fall under the provisions of this Policy.
  4. Financial investment management contracts (contact the Vice President for Finance and Administration for guidance).
  5. Service Learning Agreements with community partners, schools or other volunteer activities are not required but they are encouraged particularly when liability issues could arise through the agreement. If a contract is written for these purposes, it will fall under the provisions of this Policy.
  6. The Student Handbook.

Policy Elaboration

When Written Contracts Are Required

Not every arrangement involving the purchase of goods or services by the College, or the use of college facilities or resources by third parties, will require a written contract; but many do. In general, if the arrangement involves any significant risk or potential liability that needs to be allocated between the parties, or involves a situation where the duties and responsibilities of the parties are not so basic and obvious that they do not need to be spelled out in writing, then a contract should be used. In the following subsections, some common types or categories of commercial or business transactions are described, and situations requiring (or not requiring) a written contract are specified. Keep in mind that contracts may be originated either by the College or by the other party to the agreement. Regardless of where they originate, they are typically modified by the other party and the revision approved by both parties.

Purchase of Goods

Finished (or "off the shelf") goods that are commonly purchased by cash or credit card valued under $10,000 do not generally need a contract. However, finished goods or equipment that are part of construction projects or which require the vendor to deliver, install and/or service the goods on campus or the parties need to be clear about issues such as specifications for the goods, the manner and timing of delivery, limitation of warranties, opportunity to cure defects, or payment terms, usually require a contract and should be purchased using the College purchase order form or other contract form which will set forth basic terms and conditions including insurance and indemnity agreements.

Provision of Services

We require contracts in place for instances where the College is providing services, facilities or other resources to third parties. Examples include camps, conferences, persons or companies filming on campus, having other special events on campus such as weddings, receptions, seminars, etc. Services related to sponsored research are governed by a separate set of policies and procedures appearing elsewhere on this web site.

Purchase of Services

In general, services which the College (including student activities) is procuring and which will be provided on campus for hire should have written contracts. This includes arrangements with independent contractors for facilities work, caterers, speakers, consultants, performers, videographers, etc. Services that are provided off campus for payment upon conclusion of the work (e.g., a person is hired to write an article and receive payment upon receipt of satisfactory product) may or may not require a written contract. As stated above, contracts should be used whenever the arrangement involves any significant risk or potential liability that needs to be allocated between the parties, or involves a situation where the duties and responsibilities of the parties are not so basic and obvious that they do not need to be spelled out in writing. A contract should also be used when other specific concerns need to be addressed, such as ownership of the work.

Regardless of the cost of the service provided, where the service is provided, or whether or not a contract is executed, members of the campus community may not pay for services out of their personal accounts and then seek reimbursement from the College for these expenses. Rather, all payments for services must be made directly from the College to the individual(s) providing the services in order for the College to comply with its tax and other Federal reporting obligations.

Arrangements involving low-dollar-value, and relatively minor professional services related to scholarship activities, such as hiring a book editor, indexer, translation or transcription services, analysis services, requisition of instruments or equipment or small immediate repairs to instruments or equipment that the person hiring the services has budget authority for through his/her grants, research accounts or faculty fellowship do not require written contracts, unless the equipment to be repaired or serviced is on campus and the work is potentially hazardous.

Entertainment

Any arrangement that commits the College to hire entertainers or provide entertainment services requires a written contract. All payments for entertainment services must be paid directly by the College to the individual(s) providing the entertainment in order for the College to comply with its tax and other Federal reporting obligations.

Art / Exhibits

Any agreement to borrow or lend works of art, special collections, archives or exhibits requires a written contract.

Miscellaneous

Any agreement with a third party that could create a condition that could result in more than a minor liability to the College (whether in favor of the contractor, its employees or others) or that could feasibly result in a dispute if the understandings and obligations of the parties are not clearly specified in advance, should normally be the subject of a written agreement. These arrangements should also be reviewed against these guidelines and against the contract template list to help you determine if a contract is appropriate or necessary.

Remember: Ask for Advice

Vendors may attempt to provide goods or services without a contract in order to avoid the cost and/or responsibility of negotiating and/or abiding by terms and conditions that would protect the college in a transaction. If there is any question about the need for a contract, consult the Director of Risk Management, who can assist in developing a contract and guiding it through the review and authorization process, prior to any negotiations.

Identification of the College

The college shall be identified as The Trustees of Smith College in all agreements and contracts. Departments and individuals may not contract in their own name on behalf of the college, but must identify the college as the contracting party. (The department may, however, be identified in the agreement as the office though which the contract is being made.) The official college address is Smith College, Northampton, MA 01063.

Contract Language

Contract forms, templates, and required language stipulated in the Guide to Contracting may change from time to time. If the forms and templates provided do not seem appropriate for the transaction or arrangement being contemplated, or if such forms or templates are a good starting point but clearly need modification, you should consult as necessary with the Director of Risk Management or other college staff (see Getting Help) to define the proper language for your particular situation.

Contract Approval and Signatory Authority

Signatory authority at Smith College is sometimes delegated but contract approval authority and responsibility rests ultimately with the college’s senior managers and officers. When these senior managers and officers delegate their approval or signatory authority, they must still exercise reasonable oversight and maintain ultimate responsibility for the contracts, and they should limit or revoke the delegated authority whenever appropriate. Spending limits or payment approval for periodic payments specified within a contract can be delegated with significant variation depending on the nature of the contract.

Contracts over $1,000,000 must be approved by the President, the Vice President of Finance and Administration, or the Vice President for Academic Affairs and Dean of Faculty. In addition to these approvals, facilities and technology projects over $1,000,000 must also be approved by the Board of Trustees and all new banking relationships must also be approved by the Trustee Finance Committee.

Other contracts that must be approved by the Vice Presidents for their respective divisions (the Vice President of Finance and Administration, Vice President for Academic Affairs and Dean of Faculty, Vice President for Student Affairs, Vice President for Development, Vice President for Enrollment and College Relations) are outlined in the Office of the Controller's policy,Signatory Authority (PDF). These individuals also have the authority to designate signatory authority within their divisions in accordance with that Policy and Procedure. Divisions and departments will be responsible to manage and direct contract approval, signatory authority, and spending authority for their staff in accordance with that Policy and Procedure.

No person who is not an authorized signatory may enter into binding contract negotiations without permission from an Authorized Signatory who is also their Division Head, or their department manager or chair. Those signing without this authority may incur personal liability, and/or may be subject to discipline by the college, including termination.

For more detailed information on who has what authority in terms of signing contracts at Smith College, see Signatory Authority (PDF)

Types of Contracts Requiring Additional Review

Proposed contracts that do not contain standard indemnity or insurance language, that have clauses that are not permitted, that provide revenue sharing with the institution, that vary significantly from standard template language or that require work by a department other than the one entering the agreement require additional review. Details concerning such requirements are provided in these guidelines.

If a reviewer believes the contract language is not in the best interest of the college, s/he will communicate all concerns to the contracting department. Unresolved differences of opinion should be brought to the next higher level of management. The contracting party (department) with the consent of its managing Vice President or the President of the College has the ultimate responsibility for and authority to enter into the agreement, regardless of differences of opinion from reviewers, subject to this Policy and specific Procedures. Purposeful assumption of higher risk may mean that the department entering the contract utilizes other or additional risk management strategies to control the risks.

When contracts will impact the work of another department, the contracting department must notify the impacted department during the contracting period. Examples are provided in these guidelines.

Legal Counsel Review

If a contract/agreement includes provisions that pose a substantial risk to the college or new, non-standardized clauses which the college department representative is not familiar and/or comfortable with, the Vice President of Finance and Administration or the Risk Manager should be contacted. The Vice President of Finance and Administration or Risk Manager will determine whether legal counsel should be consulted to ensure the contract/agreement protects the college and is consistent with all applicable laws. Legal counsel review should only be requested by the Vice President of Finance and Administration, the Risk Manager, another Vice President or the President or her designee.

Additional information on contract review is provided in the Guide to Contracting.

Clauses Not Permitted

Automatic Renewal

The college does not allow contracts to contain an automatic renewal clause unless there is also a clause permitting the college to terminate the contract at will.

Limitation of Liability

The college does not allow a contracting party to limit their potential liability except in rare or specific circumstances. All rights of recovery against others are automatically transferred to Smith’s Property and Liability insurance carriers. Limiting this recovery could adversely impact the college’s insurance coverage.

Please see Clauses Not Permitted for a more complete list of clauses that the college does not allow within contractual agreement.

Exceptions for State and Federal Agencies

The Commonwealth of Massachusetts, the Federal Government and most states will not provide insurance or indemnity in their agreements with their contracting partners. In such instances, the college normally will accept the agency’s contract without such provisions. When entering into a contract with such a governmental entity, it is recommended that the contracting party attach the college’s standard addendum and any other desired language which may act as a guideline for the parties to follow in the event of an adverse event or outcome; however such attachment is not likely to be considered binding. Contracting departments also need to be very careful in considering whether or not the other party is truly a state agent or not – many state universities or colleges do not have the same immunity protections as other state agencies (e.g., the State Police), and some quasi-public entities may not be precluded from providing insurance or indemnification to other parties they do business with.

Requirement of an Arm’s Length Transaction

See the college's Conflict of Interest Policy for additional information.

If a contract directly benefits the employee forming the contract or the employee who is responsible for managing the contract, or such a person’s relative or personal friend, or poses other potential conflicts of interest whether real or perceived, (e.g., the contract initiator or a key department member serves as a paid consultant to the contractor), the contract must be reviewed by both an authorized person with signatory authority who is unconnected with the agreement and the division Vice President, with all potential conflicts of interest disclosed to the Vice President. Two particular areas of concern are 1)travel and entertainment provided by a contractor to individuals (who are signing or approving agreements), which must be appropriately linked to the substance of the contract, and 2)compensation or gifts of significant value to individuals (who are signing or approving agreements), which are not permitted. The risks for such agreements include self-dealing, operational difficulties, financial loss to the college, and damage to the reputation of the college.

Any agreement that involves revenue sharing (including commissions, fees, or other payment) with the college, department or an individual from sales by the outside party to other third parties (including students, alumnae or employees) must be reviewed by Risk Management and the Vice President for Finance and Administration or his/her designee. If the agreement is being entered into by the Finance and Administration Division, it must be reviewed by another Vice President as well. Such arrangements are rare and generally discouraged, since they normally signify a commercial joint venture in which the college may assume risk of loss, and may implicate non-profit tax questions or concerns.

Whistle-blower Policy

If a person believes that a supervisor, colleague, subordinate, or any other person is acting outside the college policy on contracting, s/he should report the concerns to their division Vice President or Risk Manager. (See Whistle-blower Policy).

As per the Whistle-blower policy, retaliation against any person who reports suspected or identified problems, malfeasance or other wrongdoing is prohibited by law and college policy.

Contracting Procedures

Smith College contracting procedures in the Guide to Contracting are included by reference in this policy. However, it is recognized that procedures and guidelines may be changed more frequently than the policy. Contracting departments should refer to both Policy and Procedure when entering into and developing contracts and agreements.