Contractual Liability

Contractual Liability

TU chapters and councils routinely enter into contracts to further their conservation work. Many of those contracts, especially those involving stream-improvement or other construction work, have risks for the chapter or council involved and, in some instances, for the national organization, as well. The Legal/Risk Management Committee of the Board of Trustees has prepared a document, “Contract Guidance for TU Chapters and Councils,”which requires that the following categories of chapter and council contracts be submitted in draft form to volunteer operations staff for review. All of these categories of contracts involve potentially serious risks for the chapter or council involved.

    1. Any proposed contract under which a chapter or council agrees to indemnify anyone unless the proposed indemnification language limits the indemnification obligations to the acts and omissions of the chapter or council that are covered by TU’s insurance.
    2. Any proposed contract involving the removal or repair of any dam, any work on abandoned mines, and any work on possibly polluted sites.
    3. Any proposed contract with a federal agency when the amount of the contract is $100,000 or more.
    4. Any proposed contract with a state agency.
    5. Any proposed contract involving a public road or highway or involving a railroad right of way.

Volunteer operations staff may exempt from this review process proposed contracts of chapters and councils that have established their own appropriate legal review of contracts and that follow the guidance for contracts established by the Legal/Risk Management Committee. For contracts involving uninsured or excessive risk, the Board of Trustees has established a process for review involving senior staff and members of the Legal/ Risk Management Committee. To review the policy establishing this review process or to download a copy of the “Contract Guidance for TU Chapters and Councils” document.

Agreements under which a chapters or council agrees to indemnify or hold harmless another party are particularly fraught with risk. As indicated above, any proposed agreement under which a chapter or council agrees to indemnify or hold harmless another party must be reviewed and approved by national staff unless the proposed indemnification language limits the indemnification obligations to the acts and omissions of the chapter or council that are covered by TU’s insurance. If a chapter or council does enter into an indemnification agreement that goes beyond the coverage provided by TU’s insurance policies, then any liability under that agreement is solely that of the council or chapter. Chapters and councils should always avoid agreeing to pay attorney fees, expenses or costs for another organization in connection with TU activities.

In many cases TU chapters and councils sign memoranda of understanding (MOUs) with a variety of partners. MOUs can be helpful to the extent that they set out clearly the obligations of the parties to the document and thus can help to avoid problems down the road about what each party’s obligations are. Chapters and councils should be aware, however, that MOUs are binding contracts that impose enforceable obligations on the parties. Hence, they must be entered into carefully, and chapters and councils should only take on obligations that they are sure they can fulfill. Of particular importance is any provision of an MOU that addressed ownership of funds raised by the TU Chapter in the joint effort. TU’s document entitled “Contract Guidance for Trout Unlimited Chapters and Councils,” referred to above, contains more detailed information on how chapters and councils should address contracts and MOUs. If you have any questions about proposed MOUs or would like to know whether such a national-level MOU template is available for the partnership your chapter/council is exploring, please contact TU’s Vice President for Volunteer Operations. To the extent that a proposed MOU seeks to have TU, a chapter or a council indemnify or hold another organization harmless, please see the question and answer on indemnification, above.

Proper drafting and negotiation are essential to avoid the common pitfalls of contractual liability. Volunteer operations staff will be happy to review any proposed contract, but a draft of the proposed contract is required. To facilitate the process and avoid unnecessary risks, chapters and councils  seeking national staff review of proposed contracts should submit a draft of the contract at least 14 days before the date of scheduled execution.

In addition to the above, for their own protection, chapters and councils should require committee and/or chapter board approval before contracts are signed or other commitments made that involve large sums of money or long periods of time. Be aware, however, that in most cases an outside company or person is entitled to rely on the “apparent authority” of an officer of a corporation or organization. Therefore, the lack of chapter board approval will generally not invalidate a contract or commitment signed by an officer of the chapter.

In addition, many kinds of contracts are enforceable even if they are not put into writing. Always use written contracts, so the responsibilities of the parties are clearly set out.

If your chapter or council decides to hire staff, please contact TU’s Chief Financial Officer before you do it. TU has established requirements for the hiring of any staff, including any staff hired by a council or chapter.