What Should a Contract Include?

A contract defines the terms of the relationship. Anything and everything that matters should be included. The primary virtue of a good contract is its clarity: does the contract lay out, clearly and completely, the expectations of the parties? If there is a disagreement over what a contract says or means, courts look to what a reasonable, objective third party would understand the contract to say or mean. “Test” a contract by pretending to be a third party who knows nothing about your agreement, then read the contract. Can you understand what the end result is supposed to be, who is responsible for what and exactly how much it is going to cost?

1.  Who – The Parties

One of the parties is, of course, “The College of William and Mary in Virginia.” That is the legal name of the College. The various Schools, Departments, Offices, Centers, etc., are not legal entities and do not possess the authority to contract. Contracts should be in the name of the College. The full name is preferred, and a less cumbersome “nickname” can be used in the remainder of the contract. For example: “The College of William and Mary in Virginia (hereafter ‘the College’)…”. Other substitutions (Contractor, Licensee, Lessor, Customer, Owner, etc.) are acceptable, so long as the word or term chosen accurately reflects the College’s status.

There will, of course, be at least one other party to the contract. It is important to use the correct legal name of the person (or other legal entity) who is to fulfill the contract’s requirements. The following may assist your using a correct legal name:

a.  Individual – Use the full legal name of the individual, not a nickname, e.g., Vincent W. van Gogh, not Vinny van Gogh.

b.  Sole proprietorship – Usually these are in the form of d/b/a, e.g., Vincent W. van Gogh d/b/a Sunflower Painting

c.  Partnership – These are unincorporated associations, where the partners share liability as well as profits. There is no distinct nomenclature to help identify partnerships.

d.  Limited liability partnership or limited liability company – These are partnerships that have incorporated under state laws, making them separate legal entities with their own names. Use the full legal name of the entity, which will include L.L.P. or L.L.C at the end, e.g., Sunflower Painting, L.L.C.

e.  Corporation – This is another form of incorporated entity. The correct legal name can be checked through looking on the website of the Clerk of the State Corporation CommissionThe name will often be followed by “Inc.”, as in Sunflower Painting, Inc.

f.  Governmental entity – The correct legal name will normally be as defined by statute.

2.  What – The Rights and Duties of the Parties

In some respects, this is the heart of the contract – what the parties will do. These should be:

Clear – There should not be confusion about who is supposed to do what. “Van Gogh will paint the Wren Building” does not tell us whether the building is to be painted inside or outside.

Complete – Everything that matters, everything that the College wants to be sure happens (or doesn’t happen) should be spelled out. This means thinking about what is not in the contract, but should be. “Van Gogh will paint the Wren Building” leaves the choice of color up to van Gogh.

3.  When – The Duration of the Contract; Deadlines

It is almost always important that the goods be delivered (or the service completed) by a deadline. The contract should be clear on the College’s expectation about timing. There are several ways for a contract to address deadlines: a window of time for performance (Van Gogh shall have 6 days to paint the Wren Building, beginning on April 1, 2013), or a deadline (Van Gogh’s painting of the Wren Building must be completed by Louise Kale’s birthday) are common. Develop the wording so that it meets the College’s needs and is reasonable for the vendor. Sometimes meeting the deadline is critical; if so, the contract should specify “Time is of the essence.”

4.  Where – The Place of Performance; Be specific

While the place of performance may seem obvious, it should be included. Otherwise, Van Gogh might not paint the Wren Building (111 Jamestown Road, Williamsburg, Virginia), but the Wren Insurance Building (SimCity 4). Or, suppose the Van Gogh contract included painting of benches surrounding the building; would we require they be painted in place or off site?

5.  Why – Any Relevant Background, Purpose

Sometimes it is helpful for a contract to include any overarching goal, purpose, or context. This information can help the contractor – or a judge – understand the larger objective of the College. Why is the College painting the Wren Building: is this a regular maintenance project or are we attempting to restore the Wren Building to its appearance in the 1700’s? The College might be pickier – understandably – about the materials or manner of performance if the latter. 

6.  How – The Method of Performance

Include any expectation of how the work must be performed. Is Van Gogh going to spray paint or use a brush? Will he prepare the surface? Will he use a ladder or a lift to reach the high points? Will he use drop cloths to protect the shrubs? If nothing is mentioned, Van Gogh can do the work however he wants, so long as he performs the task – and the College cannot compel differently.

7.  How much – The Amount and Terms of Payment

Most College contracts will require the payment of money, and the contract should be both clear and specific about the amount, manner, and timing of payment. Is Van Gogh being paid by the hour or by the job? Is he responsible for securing the materials or is the College paying for the materials and his compensation is for labor only? Commonwealth payment terms are normally Net 30 upon completion of work and receipt of an invoice in Accounts Payable. Down payments and/or deposits are normally unacceptable.

8.  What if – Dealing with Performance Issues; Termination

What if Van Gogh has an ear injury and cannot complete the work on time? What if it rains continually before the completion date? Problems can arise – and do. Sometimes a contractor will deliver a substandard performance. Occasionally there are external causes (such as weather) that interfere with performance. Contracts often include terms specifying how such problems will be handled, and can even provide for the termination of the contract. These terms should be clear, specific, and not burdensome; the parties will be required to comply with these provisions. Typically, termination clauses require the giving of a written notice to the other party of the problem, an opportunity for the party to correct the problem, and the right to terminate if the problem is not corrected. It is in the College’s interest to have a means of terminating a contract if it is not satisfied.

9.  Says who – Signatures

Van Gogh assumes that if you are signing the contract, you have the authority to commit the College to his services. That is only true if you have Signature Authority for this type of contract (see Signature Authority). Unauthorized individuals who sign contractual agreements on behalf of The College may be held personally liable for those contracts.

The person signing the contract must also be someone with authority to bind the contractor.  If your contract is with Sunflower Painting, does Van Gogh the salesman have signature authority to bind them to a contract?