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A Contract
Guide For the
PurposeDriven But
Easily Bored
A. What is a
Contract?
Will Reeses Pieces always have that little
piece at the bottom that sticks to the
wrapper? Undoubtedly. Can Hotel California
by the Eagles be listened to without indulging
in an air-guitar solo? ABSOLUTELY NOT. So
you see, some things simply cant exist
outside the forms we associate with them.
But contracts arent one of those things.
Unfortunately, theres a misconception that
contracts have to mimic encyclopedias in
complexity and size. This just isn't true.
Simply put, a contract is a pinky swear. You
promise to do something; I promise to do
something in return. Best case scenario?
Theres an outline of what those somethings
are, although youll learn thats not always the
case. We call this two-step process Offer and
Acceptance. Without getting into the weeds,
there must be Offer and Acceptance for a
contract to exist.
B. What Counts As a
Contract?
Does a contract have to be in writing?
Absolutely not. Contracts can be spoken into
existence. Sometimes, the law simply implies
that a contract exists.
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This is why it's so important to watch what
you say and to get final contracts in writing. If
someone sends you a quote that you need to
meditate on, make that clear.
First, you want no ambiguity about whether or
not a contract exists. Second, you want to
know your exact obligations under the
contract. Its easier to glance at sheets of
paper and refresh your memory than to
remember every word youve ever spoken on
the topic.
I.
The "Four
Count
Corners"
C. Purpose of this
Paper
My purpose isnt to make you a contractsavant. Youll have to suffer through 3 years
of law school for that.
In reading this light introduction, I do hope
you grow more comfortable with what a
contract is and what to watch for. I also want
to underscore the not-so-fun consequences
of taking contracts lightly.
To keep this paper from running 300 pages, I
cant and wont cover everything. Nor can I go
into too much detail, which Im sure youre
sad about. Dont worryIll cover everything
you need to think about when implementing a
contract, along with language to consider and
structures to keep in mind.
A quick note: Im writing from the perspective
of nonprofit contracts. (Not that there are
special, encrypted templates for nonprofit
organizations.) To clarify, I'm writing from the
perspective of a nonprofit organization using
contracts, keeping in mind the unique space
these organizations occupy, along with the
expectations and requirements they struggle
with. Why? Because when Im asked about
contracts, it's usually within the context of
nonprofits. But the same principles discussed
here apply to all purpose-driven organizations
(associations,
non-charitable
social
enterprises, etc.) that deal with similar
pressures. And honestly, the same concepts
of contracting apply just as easily to for-profit
corporations.
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D. Questions to Ask
Before Entering Into
a Contract
Because this is from the perspective of
purpose-driven organizations, here are a few
questions to ask before entering into a
contract.
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aren't in the best interests of your
stakeholders or in furtherance of its mission.
That a contract conflicts with any of these
may not always be apparent. For example, if
you purchase branded coffee for sale, the
vendors supplying that coffee (also called the
supply chain) may involve people or practices
that run counter to your mission. Do your
homework. Its essential to ask about the
supply chain and do your homework. These
could include the types of laborers a vendor
uses, the wages they pay, or how they exploit
raw resources. Have you looked into the
vendor to see if there's been any accusations
of human rights violations? Is the region
known for destructive harvesting? And if so,
have you inquired into how what you're
purchasing is harvested?
Why do I point out this issue? Because
organizations
sometimes
forget
that
accountability doesn't end with books and
accounting. Organizations are expected to
embody their mission statement, and simply
not knowing isn't a good excuse in this age of
information.
You might find yourself wondering, who will
know? Remember, there are instances where
contracts have to be filed publicly. It isnt
completely outside the realm of possibility
that others will see these contracts, or even
look them up purposely. So before you worry
too much about language, seriously consider
whether the contracting company is one that
deserves your organization as a client.
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cash reserve do you have? The smaller a
reserve, the less sense it makes to take on
the brunt of risk.
Ultimately, how much risk an organization
can accept is one of those really important
board and management convos that must
take place. Set aside some time at the next
retreat, or have a special meeting on the
topic, giving everyone a chance to collectively
meditate on, decide, and communicate a
decision.
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a conflict of interest policymake sure
processes are embedded in the contract that
allow you to comply with the policy.
(Brief asidebecause you can't open a
resource these days without someone
screaming, "Get
a Conflicts of Interest
Policy!" I assume you have one in place. If
not, get a Conflicts of Interest Policy.)
Now, to see how this would play out, imagine
an ED wants to hire a consulting firm on
aerospace education. The only problem is,
the firm the ED likes has a board members
wife as a VP. But the ED ran an RFP and no
one else really does this type of consulting.
Not to mention, the pricing is right at market.
The ED decides to take the next step with the
firm and asks that it sign a Letter of Intent.
Before the ED signs it, she needs to make
sure she's covered insofar as the Conflicts of
Interest Policy is concerned. One way to do
this is to make contract signatures contingent
on board approval. That way, the ED is able
to get approval as required by the board,
while also moving forward with negotiations.
I'm not saying this is necessarily how the
process has to go. In fact, I'm not a big fan of
Letters of Intent, for various reasons. But I
see them often, and the process outlined
above offers a good example of how an
organization can cover themselves.
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software, etc.) you're purchasing. And more
importantly, do those rights match the rights
you actually need?
Or the rights you
anticipated?
E.
Other
Logistics
with Contracts
That's it for the language-specific concerns of
contracts. Is there a ton more to think about?
Sure there is, but again, we're trying to keep
our page count below 300.
Here are a few logistical concerns to keep in
mind as you negotiate and finalize your
contracts:
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F. Takeaways
There are other aspects of contracting, like
management and administration. But I'll cover
those issues in a separate paper.
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control of the process by understanding what
your contracting philosophy is, exploring the
nuances of each contract on a case-by-case
basis, and making sure you protect yourself
and your interests.
Erin McClarty, PLLC helps drive the purpose
driven further. With legal counsel, tools,
resources and training that are easy to
understand and afford.
Like this paper? Sign up for our newsletter at
www.emcclartypllc.com for more resources.