I. Non-CSU Drafted Contracts
Often, parties seeking to enter into a contract with University will submit contracts they have drafted for CSU's approval and signature. Due to the wide array of contractual arrangements and the relative sophistication of third-party vendors, contracts submitted to CSU for signature may or may not contain adequate language to comply with Georgia law.
Rather than spend unnecessary time attempting to revise these contracts, the Office of General Counsel has drafted a CSU Contract Addendum that can be attached to any non-CSU contract. Use of the Addendum ensures that contractual arrangements, even with the use of a non-CSU contract submitted by a vendor, are compliant with Georgia law.
II. Prohibited Contract Terms
CSU is prohibited from agreeing to certain contractual terms because it is an instrumentality of the state of Georgia. It is incumbent upon individuals initiating or signing contracts to review the contract thoroughly before submitting it for contract review and either highlight or remove those prohibited terms from the contract.
It is advisable to inform parties with whom you may be negotiating the term of contract of the existence of these contract terms in order to avoid surprises or delays in the contract approval process. Most sophisticated parties having done business with any governmental unit should generally be aware of the limitation imposed upon public entities like CSU.
a. Indemnification/Hold Harmless agreements
- State agencies are prohibited from agreeing to indemnify or hold harmless third parties. These provisions have been determined to violate the prohibition against pledges of the State's credit and the prohibition against gratuities. The Attorney General has repeatedly rules these provisions to be invalid as unauthorized attempts to contractually waive the State's sovereign immunity.
b. Governing Law
- Contracts in which the University is a party cannot contain provision in which the University agrees to be subject to the laws of another state. Georgia law requires that actions be brought only in the superior court of Fulton County, Georgia when involving an alleged breach of written contract by a state's agency. O.C.G.A § 50-21-l(b). Additionally, Georgia law requires that all tort actions against Georgia under the Georgia Tort Claims Act be brought only in the state court or superior court of the county in which the alleged loss occurred. O.C.G.A § 50-21-28. The Attorney General has exclusive authority and control over all matters of litigation or potential litigation involving State agencies and has clearly articulated that Georgia governmental institutions are precluded from entering into agreements that expressly subject them to another's state's law.
c. Arbitration/Waiver of Right to Jury Trial
- Contracts containing provisions subjecting the University to arbitration or waiver of the right to a jury trial contract are invalid. The Attorney General has exclusive jurisdiction in all legal matters related to the executive branch of Georgia government. O.C.G.A § 45-15-34. The Attorney General is the "legal advisor of the executive branch" and is required to "represent the state in all civil actions tried in any court." O.C.G.A § 45-15-3(4) & (6). Whether a matter involving the University is litigated before a jury or resolved through arbitration is a decision within the exclusive purview of the Attorney General and cannot be contractually limited or altered by CSU.
d. Multi-Year contracts
- The Georgia General Assembly appropriates revenue and other sources of state funds to its instrumentalities from year to year. Because the ability to meet it's financial obligations is dependent upon these appropriations, the University may not execute a contract for the purchase of goods or services that obligates future fiscal years' appropriations. Accordingly, the term of a contract with the College requiring the expenditure of funds may not extend beyond the current fiscal year, unless the College has on hand at the time of execution, the appropriated and dedicated funds sufficient to meet its entire obligation under the contract. The University may enter into a contract that can be renewed at its discretion each fiscal year for multiple years; however, included in the contract must be specific renewal clauses and funding language that clearly provides the University with the right to terminate the contract if funds are not appropriated in following fiscal years. (There is no prohibition from entering into a multi-year contract that does not require funding.)
e. Contractual Fees, Costs, and Penalties
- The University is prohibited from agreeing to pay attorney's fees, interests, penalties, cost of add-on goods or services not priced in the contract, unknown cost increases during the life of the contract, unknown damages to a third party, or any other expense that cannot be calculated.
- The University is exempt from most use and sales taxes and will object to contract language asserting it is responsible for the payment of taxes or that the University agrees to reimburse the vendor for the payment of taxes. At most, the University will agree to language that sets forth "CSU will pay taxes lawfully imposed upon it under Georgia law."