Local Government Online (LOGON)

Administration

Contracts and Agreements

 

Contents

Introduction
Frequently Asked Questions
Narrative
Additional Resources
Applicable Laws

 

Introduction    Back to Top

A written contract should be used any time an organization is buying or selling substantial goods, services, or real estate; employing professionals such as consultants or accounting firms; or entering into an agreement with another governmental entity to provide services.

Contracts are legal documents containing promises made between two or more parties. Contracts are generally enforceable by the courts if the parties making the contract:

  • Are legally competent;
  • Have expressed their agreement and consent in a definite manner;
  • Have made mutual promises that are supported by reasonable return; and
  • Have not agreed to do something that was impossible to perform at the time of the agreement, or that is illegal or violates public policy.

Contracts should be in writing and signed by the persons who are authorized to sign for the organizations that made the contract. This should be documented by a written delegation of authority authorizing that person to sign on behalf of the organization. For a municipality the person authorized to sign would usually be the mayor or manager.

In order to contract in the name of an entity, such as a second class city, the entity must first be formally organized with the authority to commit resources under the contract. For example, once a community is incorporated as a municipality it can enter into contracts in the name of the municipality.

 

Frequently Asked Questions  Back to Top

Do contracts need to be in writing?

Yes. All agreements should be in writing, no matter how minor they seem, to ensure that each party understands what they are agreeing to and to document this fact. Under Alaska Law AS 45.02.201 (seeThe Current Alaska Statutes) governing commercial transactions, the sale of goods valued at more than $500 must be in writing. Contracts can be made verbally by speaking the intent of both parties; however, verbal contracts are more difficult to enforce in the courts. The fact that an agreement was not put in writing is not proof that a contract was not made. We recommend not relying on spoken agreements since they may later be remembered differently by each party.

Does an attorney have to write the contract?

No. In some cases involving simple transactions such as a rental agreement or simple time purchase agreement it is not necessary to have an attorney write the agreement. It is, however, a good idea to have an attorney prepare contracts that cover complicated transactions.

A contract is a legal document that commits each party to perform under the terms spelled out in the agreement. For this reason, it is very important that each party to the agreement knows and understands what is being agreed to. If you don't understand the terms of a contract, don't sign it until it is made clear. It is also a good idea to have an attorney periodically review standard contracts like purchase orders or equipment leases that are routinely used in municipal operations to ensure they are up to date with any contract provisions that may have come into effect after the contract was drafted.

If the other party to a contract fails to perform or breaks the contract, how long does a municipality have to sue?

Under AS 09.10.053, if someone does not perform under a contract it is called a "breach of contract". A person generally has three years from the date of the breach of the contract to sue for any damages that may have occurred. However, under AS 09.10.120 (see The Current Alaska Statutes), municipalities generally have six years to bring an action for a breach of a contract.

This special law may not apply to all contracts, so review the contract carefully and/or talk with an attorney about the particular contract that is being broken.

Can one party force the other party to perform under the contract?

Going to court to force the other party to perform is called "suing for specific performance". Frequently, the courts will not enforce specific performance because it is messy and can continue the problem. Rather than enforce the performance of the contract, courts may require one party to pay another for their damage. "Awarding damages" requires the payment of cash to the party who has not breached the contract for any inconvenience caused by the breach. In cases where there is no money available to award, or there is collateral involved such as a real property contract, the court is more likely to enforce specific performance. Once a breach has occurred it is advisable to contact an attorney, particularly if the contract is complicated or involves large sums of money.

 

Narrative  Back to Top

A written contract should be used any time an organization is buying or selling substantial goods, services, or real estate; employing professionals such as consultants or accounting firms; or entering into an agreement with another governmental entity to provide services.

Contracts are legal documents containing promises made between two or more parties.

  • Parties: The contract must state the persons or entities who agree to the contract;
  • Promises: The contract must describe the promises or performance being agreed to by the parties, generally goods or services;
  • Consideration: The contract must specify the price to be paid for providing the goods or services;
  • Time for performance: The contract must also state a time when services will be performed or goods delivered and when payment is to be made.

There is a legal test for deciding whether an enforceable contract exists, which is known as a "meeting of the minds." The test requires a showing that each party fully understood the terms and fully agreed to the terms.

 

Additional Resources  Back to Top

Sample Documents:

 

Applicable Laws   Back to Top

  • AS 09.10.053 (see The Current Alaska Statutes) establishes a 3-year statute of limitation for a person to bring a legal action to enforce a contract.
  • AS 09.10.120 establishes a 6-year statute of limitation for a municipality to bring a legal action.
  • AS 09.10.210 when counting time on past due debt begins.
  • AS 29.35.010(13) conveys a general power to municipalities to contract.
  • AS 29.35.010(14) authorizes a municipality to sue or be sued
  • Title 45 of the Alaska Statutes covers commercial transactions for the sale of goods. Following is the portion of Title 45 that covers situations that a small rural community might encounter; this is not a complete recap of Title 45, which is also referred to as the Uniform Commercial Code. (See The Current Alaska Statutes)
  • AS 45.02.103-.105 definitions, index of definitions.
  • AS 45.02.106 definitions: contract, agreement, contract for sale, present sale, conforming to contract, termination, cancellation.
  • AS 45.02.201 formal requirements of a contract, provides that a contract for the sale and purchase of goods must be in writing if the value is more than $500, enforceability of impaired contract, time limit for providing written notice of objection to contract terms.
  • AS 45.02.204 contract form, agreement provisions
  • AS 45.02.205 term of offer.
  • AS 45.02.206 offer and acceptance, lapse
  • AS 45.02.207 offer and acceptance with additional terms.
  • AS 45.02.208 relevance of performance in construing the contract
  • AS 45.02.209 modification, rescission, and waiver; exclusions.
  • AS 45.02.210 delegation of performance, assignment of rights, exclusions, prohibitions
  • AS 45.02.319-.322 FOB and FAS terms, CIF and C&F, shipment, delivery of goods
  • AS 45.02.601-.616 breach, repudiation, excuse
  • AS 45.02.701-.725 remedies, standing, statute of limitations

Revised 1/26/2006

Back to Top