The City University of New York (CUNY) including its constituent colleges is a New York state entity subject to restrictions on its contracting activities that are not applicable to a private university or company. Some clauses typically found in commercial contracts cannot be accepted by CUNY. CUNY also is required to include certain terms and conditions in all of its contracts with suppliers, vendors, and consultants. The basis of these restrictions and required terms and conditions are laws and regulations of New York State and guidance from the New York State Attorney General (OAG), the New York State Comptroller (OSC), and the New York State Office of General Services (OGS).
The Office of the General Counsel (CUNY OGC) is CUNY’s system-wide resource for legal advice and representation; CUNY OGC reviews contracts for a variety of business transactions. CUNY OGC has prepared this document as an educational tool, and it summarizes certain provisions that are often included in vendor agreements but to which CUNY cannot agree or for which limitations apply. This document also sets forth certain provisions that must be included in contracts that CUNY signs. This document is intended for the use and benefit of internal clients and the business community.
Your understanding of the unique challenges and the special rules that apply to CUNY as a public entity in New York State in the contract process is appreciated, and, we believe, will be well worth the effort. While the following is not an exhaustive list of key provisions that CUNY may not agree to or must require, they are the most common. CUNY OGC will provide the final determination on what contract provisions are acceptable to CUNY in a given situation. The final determination and “approval as to form” provides the basis for delegated authority to sign contracts. Unless a contract is approved as to form, no one at CUNY is authorized to sign it.
A. Common Contract Provisions that Present Concerns:
New York regulation 2 NYCRR 7.2(b), requires the current version of The Standard Clauses for New York State Contracts to be incorporated into any CUNY contract for goods or services. These clauses are commonly called Appendix A, and this document refers to them as Appendix A. In addition, the terms and conditions of CUNY’s Purchase Order (PO) are incorporated into all CUNY contracts unless CUNY has negotiated a specific contract with a supplier that excludes certain PO terms.
- Governing Law and Venue. CUNY cannot agree to governing law or venue of any state (or jurisdiction) other than New York. See Appendix A, Sections 14 and 16.
- No Arbitration. CUNY cannot agree to arbitration to resolve disputes under a contract. See Appendix A, Section 16.
- Indemnification and/or hold harmless – Provisions that require CUNY to pay losses incurred by another party. The OAG has prohibited CUNY from agreeing to indemnify vendors or third-parties. The only (and specific) indemnity that the OAG has authorized CUNY to provide is:
Subject to the availability of lawful appropriations and consistent with Section 8 of the State Court of Claims Act, the University shall hold the [supplier/vendor] harmless from and indemnify it for any final judgment of a court of competent jurisdiction to the extent attributable to the negligence of the University or of its officers or employees when acting with the course and scope of their employment.
- Requirements that CUNY release vendors from liability for claims and/or claims for direct damages. CUNY cannot agree to waive any warranties available at law (such as warranties of merchantability or fitness for a particular purpose) or as may be provided by contract. Suppliers/vendors are responsible for their products and services as provided by law and as set forth in a solicitation, Request for Quotes, and/or its contract with CUNY.
- Requirements that CUNY pay certain costs, such as taxes, interest, penalty fees, acceleration costs, cancellation charges, litigation costs, or attorney’s fees.
- Interest and Late Payment Fees. CUNY cannot agree to vendor’s standard interest and late payment fees. NYS Finance Law sets forth the interest and late payment fees that the State permits CUNY to pay. See Appendix A (Section 15)
- Penalty Fees/Cancellation Charges/Acceleration. OSC has directed that CUNY cannot make payments unless it has received goods and services (in exchange for those payments). Therefore, CUNY cannot pay fees such as penalties, cancellation charges, and costs associated with acceleration for which CUNY is not receiving additional goods or services.
- Taxes. As a State entity, CUNY is exempt from the payment of certain taxes. The NYS Department of Taxation and Finance has determined that CUNY is exempt from New York State sales and use taxes. CUNY also is exempt from taxes in states that do not charge tax to government entities. CUNY will not agree to reimburse a vendor for the payment of taxes. CUNY will agree to pay taxes lawfully imposed upon it.
- Attorney’s Fees. CUNY cannot pay attorney’s fees in the absence of express statutory authority that permits these payments.
- Provisions Contrary to Law. The OAG has directed that CUNY cannot agree to give up rights granted by law or common law, including: statutes of limitations, trial by jury, limitation of remedies, requirements to post bond for injunctions, to sue, or to limit liability of contract parties.
- Provisions that Waive Potential Claims against the Contracting Party. The OAG prohibits CUNY from agreeing to waive its right to sue or to limit the remedies of CUNY against contracting parties.
- Disclaimer of Warranties. CUNY cannot agree to terms that disclaim all warranties of performance by the vendor. Vendors must represent and warrant that their products and services: (a) meet or exceed published standards, including any particular standards set forth in the contract; and (b) will be provided in a timely, professional manner with the level of care, skill, practice, and judgment consistent with industry standards and practices for similar services. All warranties provided by law also apply.
- Risk of Loss to CUNY prior to or during delivery. CUNY does not accept risk of loss prior to or during delivery of commodities; all deliveries of products must be FOB Destination.
- Automatic Renewals. CUNY cannot enter into agreements without appropriated funds available. CUNY cannot promise that funds available today will be available at the beginning of any particular contract renewal period. For this reason, CUNY can enter into agreements for up to five (5) years only if cost increases are clearly stated and if CUNY has the option to cancel at any time without further obligation. See Appendix A (Section 1).
- Confidentiality of Contract Documents and Contract Prices. All agreements that CUNY enters into are public contracts and subject to disclosure. Therefore, CUNY cannot agree to any clause that requires agreements to which it is a party to be confidential; however, proprietary information in a contract may be kept confidential, subject to NYS Public Officers Law.
- Requirements that CUNY provide endorsement of a vendor or a product. CUNY is prohibited by New York State Public Officers Law from providing endorsements. Vendors may not use the CUNY name or logo or any College name or logo to imply endorsement by CUNY.
- Exclusivity. CUNY cannot grant exclusivity to any vendor unless there has been a public solicitation for the contract.