Contract Formation

Question 1

What is the purpose of a contract?

Answer 1

Documents the terms and conditions of the agreement to prevent misunderstandings or conflict and creates a legal, binding and enforceable obligation

Question 2

How do Texas courts define a contract?

Answer 2

As a promise to which the law attaches legal obligation

Question 3

What conditions of a contract would open it to challenge or voidance?

Answer 3

Award given for requirements that differ from those defined in the solicitation or violating ESBD posting requirements

Question 4

What does contract law not allow?

Answer 4

Adding terms to the contract that are not part of the original contract without consent of both parties

Question 5

What is the primary concern for the State in balancing conflict of interests in contracts?

Answer 5

Benefit of the contract as a whole to the State and specifically, the taxpayers

Question 6

What care should be taken when negotiating contracts in the best interest of the State?

Answer 6

Not to include unnecessarily harsh provisions in the contract because contractors may feel aggrieved, more apt to engage in legal action, and less likely to bid in the future

Question 7

What are the essential legal elements of a contract

Answer 7

Offer- manifestation of the willingness to enter into a bargain
Acceptance- manifestation to the assent of the terms- cannot change the terms of the offer
Legal purpose- objective must be legal
Consideration- mutuality of obligation- each party receives something and make binding promises
Certainty of subject matter- terms well defined to make contract enforceable
Competent parties- competent and authorized to enter into contract

Question 8

What does a material change in a proposed contract constitute?

Answer 8

A Counteroffer, which must be accepted by the other party for there to be a binding contract

Question 9

If only 1 party makes a promise, is this consideration?

Answer 9

No, the promises must be by both parties that depend on each other, so each party receives something as consideration.
Also a consideration can be a promise NOT to do something

Question 10

Does the lack of certainty of subject matter (well defined terms) void a contract?

Answer 10

Not typically, Texas courts prefer to validate transactions rather than void them but courts cannot insert or eliminate essential terms

Question 11

Can a contract include a provision to reach an agreement on an essential term? Give an example.

Answer 11

No, the amount of monthly rent could be an essential term. If the contract says that the parties will agree on that amount, the court cannot order them to agree.

Question 12

Give examples of essential and non-essential terms related to a lease agreement

Answer 12

Location and amount of lease- essential

Method of payment- non-essential but best practice to include

Question 13

What are the essential provisions/contract terms of every contract

Answer 13

1) Terms necessary for binding contract
* terms that address scope of work,
* price and payment terms,
* contract term (length)
* termination provision (Must have non-appropriations termination clause)
* identification of contracting parties
2) Texas Required Contract Clauses

Question 14

What is the most effective means of protecting agency from unintended risk?

Answer 14

Clearly stated terms and conditions

Question 15

What are contract termination provisions?

Answer 15

1) Termination by mutual agreement
2) Termination for convenience (no fault termination)
3) Termination for cause- party has failed to perform or make progress or breached the contract)
4) Termination for non-appropriation

Question 16

What are alternatives to termination for cause?

Answer 16

Cure notice- specifies a period of time to correct the deficiency
Corrective Action Plan- identifies activities that must be performed to restore compliance

Question 17

What is the primary objective of every contract award?

Answer 17

Obtain best value for the state

Question 18

What form can the contract be in?

Answer 18

PO or a formal signed agreement

If a formal agmt is used, the PO documents the encumbrance of funds

Question 19

For what procurement methods are negotiations permitted?

Answer 19

RFP
RFO
TXMAS purchases
State Use (for services NOT goods)
DIR Cooperative Contracts
Consulting and Professional Services
Sole source and competitive proprietary
Emergency purchases

Question 20

What procurement method is negotiation NOT permitted?

Answer 20

IFB, unless only 1 qualified bid received

Because cost is the main factor for IFB

Question 21

How does an “unlevel playing field” occur in negotiations with state governmental entities?`

Answer 21

1) If the procurement objectives are changed
2) when the composition of the eligible vendor pool would have been different, if changed objectives had been part of solicitation

Question 22

What are negotiation team best practices?

Answer 22

1) Select members with effective communication and negotiation skills
2) Lead negotiator should be appointed (should consider a SME)
3) Include/exclude members based on SME, leadership style, negotiation skills, decision making authority

Question 23

What should the Contract Developer do so negotiations are well-prepared?

Answer 23

Engage in formal planning activities with the negotiation team so you
Know prevailing prices, supply conditions
Know critical contract terms
Know settlement range

Question 24

What should formal negotiation planning include?

Answer 24

1) identifying contract terms that are crucial (unwilling to compromise)
2) Prioritizing acceptable trade-offs
3) establishing settlement range
4) anticipate positions that will be taken by vendor

Question 25

What is technical leveling?

Answer 25

helping a respondent to bring its response up to the level of other responses through successive rounds of discussion, usually by pointing out weaknesses in the response.

Question 26

What is technical transfusion?

Answer 26

disclosure of technical information or approaches by one respondent to other competitors in the course of discussion

Question 27

What is prohibited auctioneering?

Answer 27

• disclosure of competing respondents’ cost/prices (even if the disclosure is made without identifying the vendor by name); and
• advising a respondent of its price standing relative to other respondents.

Question 28

What are performance focused negotiations?

Answer 28

1) Focus on performance results (not exclusively purchase of goods or services)
2) Based on willingness of compromise
3) Effective listening, establishing goodwill, and ability to leverage negotiations

Question 29

What is the end goal of performance based negotiations?

Answer 29

mutually beneficial agreement where the successful respondent makes a reasonable profit but also delivers the products/services on time with the highest possible quality

Question 30

What are the important components of negotiation to create value and bargaining power?

Answer 30

Effective listening, establishing goodwill, and ability to leverage negotiations

Question 31

What are Recommended Clause provisions?

Answer 31

Administrative provisions
Provisions that allocate risk and specify remedies,
Provisions that relate to the identification and safeguarding of confidential information, and
Provisions that relate to rights and ownership of work product and intellectual property.

Question 32

What are some of the Texas Required Contract Clauses?

Answer 32

Antitrust Info
Assignment
Buy Texas Affirmation
Child Support Obligation 
Computer Equipment Recycling Program
Contracting Info Responsibilities
Cybersecurity Training
Dealings with Public Servants
Debts and Delinquencies
Disaster Recovery Plan
Disclosure of Prior State Employment
Dispute Resolution
Boycott Israel
E-verify program
Excess obligations prohibited
Excluded parties
Executive head of state agency
False statements
Financial participation (paid for developing specs)
Foreign terrorist
Former agency employees
Governing law
Human Trafficking prohibition
Indemnification
No Conflict of Interest
Prior Disaster Relief contract violation
PIA
Signature authority
State Auditor's right to Audit
Suspension and debarment

Question 33

What are examples of Texas Recommended contract clauses?

Answer 33

ADA
Disclosure of Interested Parties
Contract term
Drug-free workplace
EEO
Force majeure
No felony criminal convictions
Records retention