ADMINISTRATIVE PROCEDURE

Establishing External Sales Agreements (Contracts)

Applying risk base factors to External Sales Agreements (Contracts)

For sales transactions that fall within the low risk criteria for all risk factors, units can:

  • use a University-approved contract by following this procedure or
  • bill customers via the EFS billing system, which incorporates University-approved terms and conditions.

For medium or high risk sales transactions, units should follow the policy and this procedure to establish an external sales agreement.  To determine if the sales activity is low, medium, or high risk, reference Appendix A of the policy or complete the on-line External Sales Risk Assessment.

Introduction

External sales transactions between a University Department / Unit and a non-University entity must use a University-approved agreement (contract) for external sales transactions that do not fall within the low risk criteria for all risk factors.  To determine risk level, see Appendix - External Sales Risk Assessment. or the on-line risk assessment. The Office of the General Counsel (OGC) has created a standard Services Agreement (OGC SC102) which can and should be used in most instances. For other External Sales agreement forms that may be used, see External Sales Contracts in the Contracts Library. In general, an agreement (or contract) has two primary purposes. First is to document in writing a mutual understanding with the customer. This understanding includes what the University's obligations are to the customer and what the customer's obligations are to the University. Both parties in the agreement will have a clear understanding of what their individual obligations are and who needs to be contacted if there are to be any changes to the agreement. Second, the agreement helps mitigate risk to the University by clearly stating or disclaiming things such as warranties, use of University name or logo, indemnification, export controls, 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) (post June 2009) 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, file a new Internal/External Sales Approval form with the Internal/External Sales Compliance Office at extsales@umn.edu.

  2. WHEN POSSIBLE, USE THE UNIVERSITY OF MINNESOTA PREAPPROVED STANDARD AGREEMENT OR CONTRACT. See External Sales Contracts 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 'Description of Service' section. This should be very detailed and include any unique items such as delivery dates, report formats, disposal of excess material for testing, reimbursable costs, etc. The activity being described must follow the activity approved on the Internal/External Sales Approval form referred to in step 1.
      • 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 section. Review project budget and pricing to make sure that all direct (lab supplies, operator time, etc.) and indirect costs (administrative time, lights, phones, etc.) are accounted for in the rate. Unless creditworthiness has been pre-determined, compensation should be paid "in full upon signing of this Agreement". The Unit is responsible for any lost revenue from customer's non-payment.
      • Term section of the agreement. Enter an 'Effective date' (start date of the agreement) and an 'Expiration Date' (stop date of the agreement). Be sure to include extra time for contingencies such as bad weather, staff illness, etc. In general, agreements are for five years or less. Contact the Office of the General Counsel for assistance if the desired term is greater than five years.
      • Notices section. 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. Enter the employee's Name and Title. Refer to the Delegations Library in the UWide Library to see who has been delegated this authority. The right signature block is for the Customer's Company Name, Signer Name and Title.

    Note: Seemingly minor changes to these terms and conditions can have serious consequences and should never be made without being reviewed by OGC.

  3. Finalize the Agreement and retain a unit copy.
    • Submit contract to Internal/External Sales Office for assignment of contract number.
    • Before signing the agreement, forward it to the customer for their signature.
    • If the customer signs the agreement 'as is' with no changes:
      • Countersign the agreement
      • Proceed with the external sale.
    • If the customer changes the agreement, or wants to make changes to the agreement, contact the Internal/External Sales department or the Office of the General Counsel for assistance. PLEASE NOTE: CHANGES TO A UNIVERSITY FORM, OR USE OF A NON-UNIVERSITY AGREEMENT MAY DELAY OR EVEN PREVENT FINAL APPROVAL OF THE AGREEMENT. Remember to confirm that the person who is signing on behalf of the University MUST HAVE BEEN DELEGATED AUTHORITY TO SIGN EXTERNAL SALES AGREEMENTS. To find out who has been delegated authority to sign, go to http://compliance.umn.edu/delegationHome.htm.

Considerations regarding agreements or contracts:

  • Changing the Description of Work, Compensation, Term or other sections of the Services Agreement - this can be accomplished through an Amendment to the original Services Agreement.
  • Confidentiality Addendums or Non-Disclosure Agreements - Board of Regents policies allow External Sales activities to be bound by confidentiality agreements under very specific conditions. Contact the Office of the General Counsel or Internal/External Sales Office for assistance.
  • Terminating an agreement before its end date - there are two basic reasons for terminating an agreement:
    • Failure to perform an obligation of the agreement and
    • Convenience.
  • Units are responsible for maintaining copies of all external sales agreements and managing record retention. Questions regarding Records Retention should be raised with the OGC.
  • Longer term agreements can be made that can cover multiple activities with a single customer.
  • Units are responsible for communication between the University and the customer.

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