June 21, 1989 TEE EXECUTION OF CONTRACTS Andrew H. Cline Deputy General Counsel In a narrow sense the execution of a contract is often thought to be a

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1 a. OS-600 t7. 5) DA'r Office of Chief Counsel July 21, 1989 COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF TRANSPORTATION SUBJECT : Execution of Contracts TO : FROM : ALL ASSISTANT COUNSEL - REGIONAL OFFICES ALL ASSISTANT COUNSEL - REAL PROPERTY DIVISION CHIEF, RIGHT OF WAY AND UTILITIES DIVISION CHIEF, TRAFFIC ENGINEERING AND OPERATIONS DIVISION ALL ASSISTANT DISTRICT ENGINEERS FOR DESIGN ALL ASSISTANT DISTRICT ENGINEERS FOR SERVICES ALL RIGHT OF WAY ADMINISTRATORS William J. Cressler Assistant Chief Counsel Real Property Division t Attached please find a memorandum relating to the execution of contracts. It provides a very good overview of how contracts should be signed and approved, with special care to who may and must sign on behalf of different types of entities. Samples are attached to the memorandum as well as a "contract review checklist" setting forth* items to consider in writing and reviewing contracts. The memorandum should be helpful in assuring prompt approval of all types of contracts. You are encouraged to distribute the memorandum to those persons involved with contracting. Thank you for your consideration of the memorandum. 220/WJC :mls (Panet ) cc : John L. Heaton, Chief Counsel Alexander V. Sarcione, Deputy Chief Counsel William R. Moyer, P.E., Chief Engineer Fred W. Bowser, P.E., Director, Bureau of Highway Design Manuel A. Marks, Division Administrator, Federal Highway Administration Walter E. Bortree, P.E., Director, Operations Review Group Harry G. Zimmerman, Internal Audits

2 June 21, 1989 TEE EXECUTION OF CONTRACTS Andrew H. Cline Deputy General Counsel In a narrow sense the execution of a contract is often thought to be accomplished when the parties thereto place their signatures on the document. In a broader sense "[t)he execution of a written contract has been held to include three acts : signing, unconditional delivery by the promisor, and acceptance by the promissee." 17 C.J.S. Contracts 60, at 730 (1963)." In addition, under Pennsylvania law, contracts to be executed by Commonwealth agencies generally require the approval of officials outside the contracting agency, including legal and fiscal approvals. "It has been held that where a statute provides that a contract by a government agency shall be executed in a particular manner, then in order to constitute a binding contract upon that agency, the method prescribed by the statute must be pursued." Commonwealth v. Seagram Distillers Corp., 379 Pa. 411, 416, 109 A.2d 184, 187 (1954). See also Carriage Tours, Inc. Valley Forge Park Commission, 37 Pa. Commonwealth Ct. 375, 390 A.2d 902 (1978) (contract not approved by Governor as required by statute). But see Governor's Energy Council v. American Energy Services, Inc., 90 Pa. Commonwealth Ct. 168, 494 A.2d 72 (1985), appeal dismissed, 515 Pa. 151, 527 A.2d 531 (1988) (applying estoppel to permit award of damages in absence of Governor's approval). All Commonwealth contracts should contain a clause; conditioning their effectiveness and validity

3 upon full execution and approval and delivery to the contractor. Attachments. Attachment 1 is a standard signature format that reflects the signatures and approvals commonly required on Commonwealth agency service Contracts including grant and provider agreements. This format is designed to be used generally with blueback contracts, although agencies may need to adapt it for their needs. For example, an agency comptroller may require lines for additional information accompanying his certification of availability of funds. Attachment 2 is a variation of Attachment 1 and may be used for contracts on preapproved forms. Attachment 3 is a signature format for non-service contracts including commodities contracts and leases of real property. Attachment 4 is a standard format for the Governor to delegate his authority to approve contracts or other documents. Attachment 5 is a general check list for contract review. Signature Requirements. The general rule in Pennsylvania is as follows : The assent of both parties to a written contract creates a valid contract even though it is not signed by the parties, except where such signing is required by law. 8 P.L.E. Contracts 29, at 42 (1971). Nevertheless, it is customary for parties to a written contract to express their - 2 -

4 assent to its terms by signing their names.. See Daniel Adams Associates v. Rimbach Pub, Inc., 360 Pa. Superior Ct. 72, 519 A.2d 997 (1987). Without such signatures, obvious problems of proof and substantive law could present themselves should a dispute arise. See, e.g., Section 2201(a) ; cf. Section 1 of the Act of March 21, 1772, Sm.L. 389, 33 P.S. 1 (Statute of Frauds.) Thus, it is essential for protection of the Commonwealth's interests that contracts be properly signed by the parties. As a general principle, "a person can adopt as his signature anything which he cares to identify as such, so long as there is intent that it be his signature." Department of Transportation v. Ballard, 17 Pa. Commonwealth Ct. 310, 314, 331 A.2d 578, 580 (1975) (quoting Bureau of Traffic Safety v. Finotti, 9 Pa. Commonwealth Ct. 538, 541, 308 A.2d 198, 199 (1973)). Manual 215.1, Contracting for Services, provides : "One copy (agency copy) of all contracts shall contain original signatures. Facsimile signatures may be used on other copies." M , at 8. See also Commonwealth v. Emanuel, 501 Pa. 581,, 462 A.2d 653, 656 (1983) ("a handwritten signature does not signify more or less than is signified by a facsimile signature") ; Uniform Facsimile Signature of Public Officials Act, 65 P.S. 301 et se (securities).

5 Although not a legal requirement, Manual 215.1, Contractinq for Services, states that "[s]ignatures will be dated." M , at 8. At a minimum, the approval of the Budget Secretary or comptroller should be dated because that is the final signature required for a valid contract and, therefore, may determine the effective date of the contract. Contracts should be signed by the contractor first. Manual 215.1, Contracting for Services, 3.19, at 8, discusses generally signature requirements for contracts with individuals (or sole proprietors), partnerships, corporations, and joint venturers. The central concern in this area is that the individual signing for a contracting entity have authority to bind the entity to a contract. Care should also be taken to ensure that the name of the contractor recited in the body of the contract matches the name used on the signature line. With respect to partnerships, any partner may sign for the entity unless "the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority." 59 Pa. C.S. 321(a). Also, "[a]n act of a partner which'is not apparently for carrying on the business of the partnership in the usual way, does not bind the partnership unless authorized by other - 4 -

6 partners." 59 Pa. C.S. 321(b). In limited partnerships only general partners are authorized to act for the partnership. 59 Pa. C.S. 501 et seq. With respect to corporations, their contracts, "when signed by the president or vice president and secretary or assistant secretary or treasurer or assistant treasurer of such corporation, shall be held to have been properly executed for and in behalf of such corporation." Section 305 of the Act of May 5, 1933, P.L. 364, as amended, 15 P.S (emphasis added). If the contract is to be signed by any other officer or employee, agency counsel should request a copy of the by-laws or a board resolution authorizing the officer or employee to bind the corporation. See, e.q., 2 Dunlap-liana Pennsylvania Forms, Form (Secretary's Certificate) (Rev. Ed. 1988). In a pinch, written confirmation of such authority from the corporation's counsel may be acceptable. The contract of a nonprofit corporation, "when signed by one or more officers or agents having actual or apparent authority to sign it, or by the president or vice-president and secretary or assistant secretary or treasurer or assistant treasurer of such corporation, shall be held to have been properly executed for and in behalf of the corporation." 15 Pa. C.S. 7506(a). See generally 8A P.L.E. Corporations 332, at 462 (1971). f - 5 -

7 Contracts with governmental entities typically must be signed or approved by certain officers, and of course, requirements vary among such entities. Commonwealth counsel should consult the entity's enabling legislation, charter, etc. t o determine who must sign or approve and whether the affixation of a seal is required. See, e.g., Section 202 of the County Code, 16 P.S. 202 (seal) ; Section 503 of the Second Class County Code, 16 P.S (execution by two commissioners and attestation by chief clerk) ; Section 3.5h of the Charter of Erie County, 325 Pa. Code 3.5h. (execution by county executive) ; Section 402(i) of the charter of Lackawanna County, 335 Pa. Code 402(i) (execution by controller, chairman of the board, and treasurer). In a doubtful case, Commonwealth counsel may want to seek a certification or confirmation letter from counsel for the governmental entity. Attestation and Seals. Unless required by law, a signature need not be attested for validity. Since, however, attestation helps. t o ensure the authenticity of the signature, it is commonly requested from,contractors for the protection of the Commonwealth. Unless requested by a contractor, or required by agency policy, attestation of the signature of a Commonwealth agency official is unnecessary. See generally 17 C.J.S. Contracts 66, at 743 (1963). - 6-

8 i "Except as otherwise required by Act of Assembly, the affixation of the corporate seal shall not be necessary to the valid execution, assignment, or endorsement by a domestic or a foreign business corporation of any instrument in writing." Section 13 of the Act of January 18, 1966, P.L. (1965) 1305, asamended, 15 P.S Affixation of a seal may be required of governmental entities. See p. 6, supra. When a seal is used, it should be checked against the name of the. entity as stated in the contract. Execution by Commonwealth Agency. Clearly, agency heads and deputy agency heads are authorized to sign contracts binding the agency. See Sections 206 and 213 of the Administrative Code of 1929, as amended, 71 P.S. 66 and 73. The authority to bind the agency may be delegated by regulation or by written designation of the agency head. Manual 215.1, Contracting for Services, states, "The agency head may designate in writing whomever he wishes to sign contracts and will furnish a copy of the.designation to the comptroller." M , at 8. Legal Approvals. The Commonwealth Attorneys Act provides that "[t)he Attorney General shall review for form and legality, all Commonwealth -deeds, leases and contracts to be executed by -7- Cl

9 Commonwealth agencies." Section 204(f) of the Act of October 15, 1980, P.L. 950, as amended, 71 P.S (f). With respect to executive agencies, the Act also provides that the General Counsel shall "jr]eview for form and legality, all Commonwealth deeds, leases and contracts to be executed by executive agencies." Section 301(11), 71 P.S (11). By practice and understanding, the General Counsel's review is performed first. Typically, the Attorney General's review and approval are performed by a deputy attorney general. Of course, the General Counsel also typically acts through a deputy general counsel. The authority of agency chief counsels and assistant counsels to review contracts on behalf of the General Counsel without delegation is questionable, however. Accordingly, all contracts should be approved by the agency chief counsel and a deputy general counsel (as suggested by Attachment 1) unless the chief counsel has written delegation from the Office of General Counsel. for the type of contract under review. Sub-delegation by chief counsels to deputies or assistant chiefs is acceptable, but delegation below such level should be given cautiously, in writing, and with the permission of the Office of General Counsel. Agency legal offices should maintain a complete and current binder (or file) on all approval delegations. See also M , at 11, 5.8b. at 44 (Item 23). U - 8 -

10 i Currently, there is no formal guidance on the scope of "form and legality" review. A regulation of the former Justice Department provided as follows : Review of contracts will go the substance of the contract in addition to the review of the technical sufficiency of the execution of the contract. Such review will determine : (1) the existence of statutory or other legal authority of the Commonwealth agency and official to enter into such contract ; (2) the legality of the provisions of the contract ; (3) the adequate - protection _of._,all, appropriate_rights~' and remedies of the Commonwealth in the'contract (4) the existence of an appropriation of funds for the contract purpose and of consideration for the Commonwealth ; (5) the sufficiency of the form and manner of execution of the contract. 37 Pa. Code (rescinded). A copy of a general contract review checklist is attached. (Attachment 5.) See also M , at 3. Whatever the scope of "form and legality" review, executive agency counsel are also legal advisors to their agencies. Thus, agency counsel should raise concerns through appropriate channels whenever there is reason to believe that a contract is not in the best interest of the Commonwealth. Remember, however, that agency counsel ultimately have no authority to substitute their judgment for that of the agency in programmatic matters, or for that of comptrollers in fiscal matters. The Attorney General and the General Counsel may also preapprove contract forms. Sections 204(f) and 301(11) of the Commonwealth Attorneys Act, 71 P.S (f) and -9-19

11 (f). The General' Counsel's authority in this area may be exercised only by a deputy general counsel. Requests for preapproval must be submitted first to the office of General Counsel, which will assign a form number and, upon approval, forward the form to the Office of Attorney General. Preapproved forms may be used generally without further approval of the Attorney General or the General Counsel, but chief counsels may determine that review by agency counsel will be required for the use of some or all preapproved forms. Typically, the Attorney General conditions his approval on use of the form without change in the "substantive terms and conditions." Therefore, agency counsel must review any changes to preapproved forms to determine if they are substantive. See also M b. (Preapproved forms "are to be used, without change, for the purpose intended.") For the benefit of the parties to the contract as well as approving authorities, preapproved forms should include a notation identifying the form number assigned by the Office of General. Counsel and the date of approval by the Attorney General. For example : Preapproved form : OGC No. 18-K-120 Appv'd OAG 1/31/89 Preapproved forms should also contain instructions on execution. See Attachment 2. Agency legal offices should maintain a current and complete binder (or file) on all preapproved forms (i0

12 Fiscal Approvals. Pursuant to Executive Order , the Governor designated the Secretary of Budget and Administration (now Secretary of the Budget) "to give final review and approval to all contracts for the purchase of services." 4 Pa. Code 1.332(a). Under this Executive Order, the Governor also directed the Budget Secretary to develop and publish directives "to' provide for standard provisions, definitions, guidelines for preparation, minimum standards for rights and remedies, and procedures for processing contracts." 4 Pa. t Code 1.332(b). Pursuant to this direction, the Budget Secretary promulgated Management Directive Amended i (August 19, 1985) and Manual Contractinq for Services, which has been approved by the office of General Counsel and the Office of Attorney General. The Manual sets forth in detail those procedures that must be followed in order to obtain the Budget Secretary's approval of a contract. "Normally, this review and approval shall, by delegation, be provided by agency comptrollers." M , at 3. Agency comptrollers are appointed by the Governor and supervised by the Budget Secretary. Currently, the general responsibilities of comptrollers are defined in Management Directive Amended (January 23, 1986). With respect to contracts, comptrollers "[p]erform the final review and approval of all agency contracts and grants to insure

13 conformance to Commonwealth statutes and directives and agency regulations, policy, and procedures. The scope of the.contract and grant review encompasses all aspects of the proposal and contracting process as well as the availability of funds and the reasonableness, necessity, and propriety of procuring such goods and services." M.D Amended 4.d(3). See also M , at 3, and 4.3, at 11. Gubernatorial Approval. In a number of instances, statutory provisions require further approval of contracts, typically by the Governor. In such cases a signature line should be added for that approval. For example : Approved : Governor In many instances, however, the Governor has delegated his approval power.. See Section 701(i) of the Administrative Code of 1929, 71 P.S. Section 241(i). Unless such delegation has been permanently published (as in Executive Order , 4 Pa. Code et seg.), the delegee's signature line should indicate that he is exercising the Governor's approval authority. For example : -12-

14 I Approved for the Governor By : Secretary of Transportation Agency requests for delegation of gubernatorial approval should be submitted to the Office of General Counsel for review and submission to the Governor. Delegation requests should specifically identify the relevant statutory provisions. Agency legal offices and comptrollers should maintain a current and complete binder (or file) on all delegations from the Governor. A sample delegation form is attached. See Attachment 4. I I -13-

15 SERYI(Es GRAW, AND PROVIDER CONTRACTS IN WITNESS WHEREOF, the parties to this agreement have executed it through their respective duly authorized officers, as of the date first above written. Attests XYZ, INC. Bys Names (Date) Naves (Date) Titles Titles (Seal). Approved for form and legality, COif1ONWEALTH OF PENNSYLVANIA DEPARTMENT OF GENERAL COUNSEL Bys Name (Date) Titles Bys Chief Counsel (Date) Certified for availability of funds, Department of Bys Deputy General Counsel (Date) Comptroller (Date) ATTORNEY GENERAL Approved, SECRETARY OF THE BUDGET By : Deputy Attorney General (Date) Comptroller (Date) Bys (Attachment 1] t 0q

16 OFFICE OF GENERAL COUNSEL June 22, 1989 SUBJECT : Execution of Contracts ~~ bt ~^"~Ylvani~ Departmsnt of 7rsn. TO : Executive Agency Chief Counsels FROM : Andrew.H. Cline a~~ Deputy General Counsel ~~Gb~r ~.punse~ Attached is a copy of a memorandum on the execution of contracts that should be helpful to you and your staff involved in the contracting process. The memorandum was prepared in consultation with the Office of Attorney General and the General Counsel's Contract Committee. You should be aware, however, that the Contract Committee is currently engaged in a revision of the "Contracting for Services" manual, so some references and policies expressed in the memorandum will undoubtedly require revision in the future. AHC/kab Attachment You comments and questions are welcome, of course. cc : Christopher A. Lewis, Esq. (w/attach.) Richard D. Spiegelman, Esq. (w/attach.) David J. DeVries, Esq. (w/attach.) Harvey C. Eckert (w/attach.) Deputy General Counsels (w/attach.) Contract Committee Members (w/attach.)

17 f ~, GRANT, AND PROVIDER CCKTRACrS (PR APPROVED FM) IN WITNESS WHEREOF, the parties to this agreement have executed it through their respective duly authorized officers, as of the date first above written. Attest, XYZ, INC. By, Name, (Date) Name, (Date) Titles Title, (Seal) Approved for form and legality, COMMONWEALTH OF PENNSYLVANIA DEPARINEKT OF Chief Counsel (Date) By, Department of Name, Titles (Date) Preapproved forms OGC No. 18-K-120 Appv'd OAG 1/31/89 Certified for availability of funds, Approved, SECRETARY OF THE BUDGET Comptroller (Date) Bys Comptroller (Date) Corporations, President or vice president and secretary or assistant secretary or treasurer or assistant treasurer must sign. Otherwise, copy of bylaws or resolution authorizing signatory must be supplied. Affix corporate seal. Partnerships Partner must sign ; general partner if limited partnership. Sole proprietorship, Owner must sign. Governmental entities, Provide certification of counsel on validity of execution. (Attachment 2]

18 )OC-SERVICE CdcrRACrS IN MIfl SS WHEREOF, the parties to this agreement have executed it through their respective duly authorized officers, as of the date first above written. Attests XYZ, INC. By. Names (Date) Name, (Date) Titles Title, (Seal) " Approved for form and legality, COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF GENERAL COUNSEL Bys Names Titles (Date) Bys Chief Counsel (Date) Certified for availability of funds, Department of By, Deputy General Counsel (Date) Comptroller (Date) ATTORNEY GENERAL Approved, By. Deputy Attorney General (Date) Comptroller (Date) [Attachment 3) (Di

19 6iBEJ t&to1ial D LECATIO( I, Robert P. Casey, hereby delegate to the Secretary of Transportation, the, authority vested in me by Section 514 of the Administrative Code of 1929, 71 P.S. 5194, to approve sales of real estate and grants of rights-of-way or other rights over or in real estate entered into by the Department of Transportation. This delegation shall remain in effect until revoked or superseded. By the Governor, Robert P. Casey Dated, [Attachment 41