University of Minnesota  Procedure

Establishing External Sales Agreements (Contracts)

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Questions?

Please use the contact section in the governing policy.

For low risk sales transactions units must:

  • use a University-approved Short Form (OGC SC109) contract, or
  • bill customers via EFS billing process, which incorporates University-approved terms and conditions.

Any modifications to the standard University-approved short form contract, use of an external customer contract or purchase order must be in compliance with Administrative Policy: Entering Into Contracts and be reviewed by External Sales.

For managed risk sales transactions units must use a University-approved contract (agreement).

  • Standard Contract -  The Office of the General Counsel (OGC) created a Standard Services Agreement (OGC SC102) which should be used in most situations. For other standard External Sales agreement forms, see External Sales Contracts in the OGC Contracts Library
  • Standard Contract with modifications- External Sales/OGC must review any proposed modifications to a standard contract
  • Non Standard Contract - A contract authored by the external customer. External Sales/OGC must review all external customer contracts.

In general, an agreement (or contract) has two primary purposes:

First, it documents a mutual understanding with the customer. The understanding should include the University's obligations to the customer, the customer's obligations to the University, and who needs to be contacted if there are to be any changes to the agreement.

Second, it mitigates risk to the University by clearly stating or disclaiming things such as the deliverables, compensation, ownership of intellectual property, warranties and liability use of the University name or logo, indemnification and insurance, export controls, taxes, applicable law and jurisdiction, etc.

Completing an external sales agreement (contract)

  1. Before negotiating an agreement with any external customer, review the existing Internal/External Sales Approval form (UM 1608) to verify that the scope of the proposed sale has been reviewed and approved.

    If the proposed sale is not related to the activity previously approved, complete a new Internal/External Sales Approval form or amend the existing form to include the new activity. For low risk activites, the form must be approved by the Chief Financial Manager and for managed risk the form must be approved by both the Chief Financial Manager and  Internal/External Sales Office at [email protected].

  2. When possible, use the University of Minnesota preapproved standard agreement or contract. See External Sales Contracts and the associated instructions in the Contracts Library.
    1. The department making the external sale is responsible for entering all information into the OGC approved Standard Services Agreement, to include:
      • The customer's legal name (e.g., ABC Consulting, Inc.).
      • The entity type and the state that where it is registered.
      • Description of Service - This should be detailed and include any unique items such as delivery dates, report formats, disposal of excess material for testing, reimbursable costs, etc. Additional contractual terms or conditions must not be added to this section. If this detail is available in a separate document, it may be attached and referenced in the Description of Services such as, "See Attachment A.” Generic services such as consulting, support, testing, etc., must be fully explained in this section.
      • Compensation and invoicing - Review project budget and pricing to make sure that all direct (lab supplies, operator time, etc.), indirect costs, and any additional revenue (administrative time, lights, phones, etc.) are accounted for in the rate. Unless creditworthiness has been predetermined, compensation should be paid "in full upon signing of this Agreement" and work should not start until payment is received. The University unit is responsible for any lost revenue resulting from a customer's non-payment.
      • Term section of the agreement - Enter the 'Effective Date' (start date of the agreement) and the expected 'Expiration Date' (stop date of the agreement). Be sure to include extra time for contingencies such as bad weather, staff illness, etc. Agreements must be for five years or less.
      • Notices - Enter the contact information of the unit into the 'If to the University:' field. 'If to the Company:' should be the contact information for the customer.
      • Witness Whereof section. The signature block on the left is the University employee who has External Sales Signature Authority for the unit and respective dollar amount of the agreement. Enter the University employee's Name and Title. Refer to the Delegations Library to see who has been delegated this authority. The signature block on the right is for the Customer's Company Name, Signer Name, and their Title.

        Seemingly minor changes to terms and conditions can have serious consequences and should never be made without the Internal/External Sales Office being consulted and changes reviewed by OGC.

  3. Submit contract to the Internal/External Sales Office for assignment of contract number.
    1. Before signing the agreement, forward it to the customer for their signature.
    2. If the customer signs the agreement 'as is' with no changes:
      • Countersign the agreement.
      • Proceed with the external sale.
      • Retain the signed copy in the EFS Contract Module.
    3. If the customer changes the agreement, or wants to make changes to the agreement, contact the Internal/External Sales Office for assistance. Changes to a University form, or use of a non-University agreement may delay final review and OGC approval of the contract. Confirm that the person signing on behalf of the University has been delegated authority FN02 to sign external sales agreements. To find out who has been delegated authority to sign, go to the delegations library.

Considerations regarding agreements or contracts:

  • Changes to the Description of Work, Compensation, Term or other sections of the Services Agreement can be accomplished through an Amendment (OGC-SC112) to the original agreement.  An additional five years may be added to the term of the agreement while retaining the terms and conditions of the original agreement.
  • Confidentiality Addendums or Non-Disclosure Agreements - Under specific conditions External Sales activities may be bound by confidentiality agreements. Contact the Internal/External Sales Office for assistance.
  • Termination of an agreement before the end date - there are two basic reasons for terminating an agreement: failure to perform an obligation of the agreement, or convenience.
  • Units are responsible for maintaining copies of all signed external sales agreements. See Administrative Policy: Managing University Records and Information for specific details.
  • Units are responsible for communication with the customer. The Internal/External Sales Office does not contact the customer directly. The OGC may contact the customer on behalf of the department.
  • Never start work until the agreement is signed.
  • Payment terms are net 30 days.