Section: Financial
Policy Number: 3-2
Policy Name: Contractual Liability
Date: April 15, 1975
Revisions: June 5, 1989; November, 2000; July 1, 2005

  1. PURPOSE

    To outline policies and procedures for contractual liability.

  2. POLICY

    1. Civil law holds every person responsible for the consequences of their own negligence. This applies equally to corporations such as the University, which are responsible for the acts of their employees and agents, as long as they are within the scope of their authority and not in violation of the law. The University carries liability insurance which includes contractual liability.

    2. All contracts should be between the other party and the "University of Delaware", not a college, department, or other subordinate organization. By action of the Board of Trustees, the President is authorized to sign, in the name of the University, leases, agreements and contracts. No one else may do so without a specific delegation of this authority.

    3. In addition to responsibility for its own acts, the University can have liability exposures under terms of approved contracts. As a matter of principle, liability should not be assumed for the acts or omissions of others, which are not under the control of the University, and the University should not contract to indemnify or hold harmless another party under those circumstances. The preferred contractual provisions regarding liability are for each party to retain responsibility in areas under its control and to carry adequate insurance to guarantee its ability to do so (for that purpose a single limit of $5 million contractual liability is required.

    4. Under unusual circumstances, when it is clearly in the overall best interests of the University to do so, responsibility for the negligence of the other party to a contract may be assumed subject to the following procedures.

      1. The official negotiating the contract should first attempt to obtain the preferred contractual provisions indicated above.

      2. If that is not possible, the unsigned contract should be forwarded to the Office of Risk Management with the necessary contract approval routing slip and a memorandum pointing out the liability being assumed, why it cannot be eliminated, the possible magnitude and probability of a claim, and the advantages to the University of the contract. The Director of Risk Management will endeavor to negotiate the terms of the contract to eliminate or mitigate as much as possible language that is adverse to the best interest of the University. If preferred contractual provisions can not be fully negotiated the contract and supporting documents will be forwarded to the appropriate Vice President.

      3. If the appropriate Vice President concurs that the advantages of the proposed contract outweigh the risk, he or she should sign the routing slip and forward it with the contract and the memorandum to the Executive Vice President and University Treasurer. If the Executive Vice President and University Treasurer concurs, he will also sign the routing slip and forward the whole to the President for his signature. If the Executive Vice President and University Treasurer does not concur he will discuss the matter with the Vice President to reach an agreement or refer the matter to the President for resolution.

      4. The Executive Vice President and University Treasurer will forward a copy of any contract which requires an endorsement to a University insurance policy to the Director of Risk Management, directing him to obtain the necessary endorsement and charge any additional premium to the appropriate office.

Submitted by: Office of Risk Management