State Contracting Requirements

The Contract Checklist and Standard Addendum are designed to assist the UNT System and institutions with their review of contracts and to ensure compliance with applicable state law requirements. The following is a brief explanation of some of the critical issues which the addendum and checklist, if used properly, address. Each of the items included in this list is incorporated into the Standard Addendum, which can be signed by both parties to a contract in order to ensure compliance with state requirements.

Governing law: System and institution contracts should always be governed by the laws of the State of Texas. Texas law contains many provisions which protect the state and state institutions of higher education. If another state’s law governs the contract, these protections may not apply.  Venue: Venue refers to the geographic location of a lawsuit. Parties to a contract can agree on the venue for any disputes arising out of that contract and include that agreement as one of the terms of the contract. Section 105.151 of the Texas Education Code provides for mandatory venue for the System and institutions as follows: (a) Venue for a suit filed against the System or the University of North Texas is in Denton County; (b) Venue for a suit filed against the Health Science Center is in Tarrant County; and (c) Venue for a suit filed against the University of North Texas at Dallas is in Dallas County. Contracts should not contain venue provisions which modify the mandatory venue provisions described above.

Confidentiality clauses: The System and institutions are subject to the Texas Public Information Act. Chapter 552 of the Texas Government Code. The System and institutions cannot keep information confidential if it is subject to public disclosure under the Texas Public Information Act. Therefore, any clauses in contracts which require the System or institutions to maintain information as confidential must either be deleted or qualified with “to the extent permitted by the Texas Public Information Act” or similar language.

Indemnification: Indemnity and hold harmless provisions are very important and must be reviewed carefully. A provision in a contract to indemnify or hold a party harmless is a promise to pay for any expenses the indemnified party incurs, if a specified event occurs, such as breaching the terms of the contract or negligently performing duties under the contract. Article III, Section 49 of the Texas Constitution states that "no debt shall be created by or on behalf of the State ... " The Attorney General has counseled that a contractually imposed obligation of indemnity creates a "debt" in the constitutional sense. Texas Attorney General Op. No. MW-475 (1982). Contract clauses which require the System or institutions to indemnify must be deleted or qualified with “to the extent permitted by the Constitution and laws of the State of Texas.” Liquidated damages, attorney’s fees, waiver of vendor’s liability, and waiver of statutes of limitations clauses should also be deleted or qualified with “to the extent permitted by the Constitution and laws of State of Texas.”

Insurance: The System and institutions should carefully review any clauses in their contracts which require the System or component institution to maintain insurance and ensure that the clauses accurately reflect levels of coverage. Below is a brief explanation of some common insurance requirements.

  • General Liability Insurance: It is the stated policy of the State of Texas not to acquire commercial general liability insurance for torts committed by employees of the state who are acting within the scope of their employment. Rather, third parties must look to the Texas Tort Claims Act for relief with respect to property damage, personal injury, and death proximately caused by the wrongful act or omission or negligence of an employee acting within his scope of employment. One exception to the above stated policy of the state authorizes agencies and state institutions of higher education to acquire commercial automobile insurance for the use and benefit of their employees who operate state owned, motorized vehicles and special equipment.
  • Worker’s Compensation Insurance: Employees of the University of North Texas System are provided Worker's Compensation coverage under the provisions of the Workers' Compensation Act for Texas State employees.
  • Professional Liability Insurance: The University of North Texas Health Science Center maintains a Professional Liability Self Insurance Plan for its physicians and medical students under the authority of Chapter 59 of the Texas Education Code.
  • Please contact the Office of General Counsel or applicable Risk Management Office with questions regarding insurance.

    Interest on late payments: Chapter 2251 of the Texas Government Code provides for interest on late payments to vendors. Contracts which require the System or institutions to pay interest on late payments should be modified so that any interest payment will be in accordance with Chapter 2251 of the Texas Government Code.

    Breach of Contract Claims: Chapter 2260 of the Texas Government Code establishes a dispute resolution process for contracts with entities of the State of Texas involving goods, services and certain types of projects. This statute was intended to be of benefit to parties contracting with an entity of the State of Texas. This statute requires that a state entity must give vendors notification of the dispute resolution process and its applicability to state contracts. Any arbitration or mediation provisions contained in contracts should be deleted and replaced with the dispute resolution clause contained in the Standard Addendum. The System and institutions should not enter into contracts which contain an arbitration provision as it could waive protections provided by state law.

    Obligations Extending Beyond Current Appropriations Term: If the System or an institution is a party to a contract and the term of the contract extends beyond the expiration of the current appropriations term that is in effect when the contract is entered into, the contract must contain a provision that specifically conditions the System or institutions’ financial obligations under the contract on the availability of sufficient appropriations. This is necessary to avoid the creation of an unconstitutional debt.

    Eligibility for Vendor to Receive Payment from State of Texas

    • Franchise Tax Certification: Section 2107.008 of the Texas Government Code does not permit the System or institutions to pay a vendor who is delinquent in paying state of Texas franchise taxes. The System and institutions must determine whether a vendor is delinquent, and the certification in the standard addendum helps the System and institutions to comply with Section 2107.008.
    • Payment of Debts to State of Texas: Section 2107.008 and 2252.903 of the Texas Government Code only require state institutions to include this clause in contracts with persons whom the state comptroller has determined are in debt to the state or delinquent in the payment of taxes. The clause in the standard addendum requires vendors to acknowledge that if they are in debt to the state, payments they are owed under the contract will first be applied to pay off their debt.
    • Child Support Certification: Section 231.006 of the Texas Family Code requires all vendors who do business with the state to certify that they are not delinquent in the payment of child support.
    • Certain Bids Prohibited: Section 2155.004 of the Texas Government Code states that a state agency may not accept a bid or award a contract that includes proposed financial participation by a person who received compensation from the agency to participate in preparing the specifications or request for proposals on which the bid or contract is based.
    • Limitation of Time in Which to Bring Legal Action or Claim: Section 16.070 of the Texas Civil Practice & Remedies Code states that any stipulation or agreement that attempts establish a limitations period shorter than two years is void.