Contract and Agreement FAQs
Can I sign a Research Agreement with a Sponsor on my own behalf?
All contracts and agreements must be written between the sponsor and the university. As described in Policy R10.01, there is an approval process for research contracts and agreements that involves review at many levels prior to signature on behalf of SFU. Before a contract is signed, the principal investigator will be asked to agree in writing to its terms. A researcher can enter into contractual relationship with an outside organization on their own behalf through a consulting agreement. SFU will not be able to provide advice or templates for such contracts; the researcher must find outside legal assistance.
My sponsor would like to limit the publication of results arising from the sponsored research program. Can SFU agree to such terms?
SFU Policy R 10.01 requires that results of research undertaken under the auspices of the University must be fully publishable at the discretion of the principal investigator. SFU will not enter into a research funding agreement that puts undue restrictions on the ability to publish.
SFU does permit protection of a sponsor's proprietary information contributed to a research project and does allow a short publication delay for the purpose of protecting patentable intellectual property. Research requiring additional publication restrictions may be more appropriate to a personal consulting arrangement for work to be undertaken in non-university facilities and not under the auspices of SFU.
How is SFU managing the risk of non-payment by the Sponsor?
Research contracts normally involve some sort of performance obligation on the part of the university. Principal investigators, on whose behalf the University enters into research contracts, agree to provide specified deliverables (e.g. products and reports). Payment by the "sponsor" (i.e. the external agency or company) is usually made in arrears (i.e. after the expenditures are made) according to an agreed-upon schedule, as the deliverables are met. In all such arrangements, there is risk to the university of non-payment for these expenditures; for example, deliverables may not meet the satisfaction of the sponsor, or payment may be refused because of bankruptcy or other financial difficulties.
With confidence in its principal investigators and with Research Services taking care to obtain the most favourable terms and conditions in each research agreement, the university generally accepts some level of risk of non-payment on the part of the sponsor. However, the university is reluctant to accept contracts under which payment will be made only on the basis of “satisfaction” on the part of the sponsor with the work performed, since “satisfaction” can be an elusive, subjective judgment often dependent upon unspecified criteria.
Despite efforts to negotiate such "subject to satisfaction" payment conditions out of research agreements, Research Services is seeing more and more sponsors insisting on not paying the university if they are not satisfied with the research work. Other variations of this theme are inclusion in the terms of the contract of a 10% holdback until all reports have been received (this is acceptable to Research Services); non-payment of amounts owed in the case of termination (not acceptable to SFU); and even asking SFU to accept a provision in the contract language that should termination occur, the university will repay all amounts previously provided (definitely not acceptable to SFU).
What is a non-payment guarantee? Why is it necessary?
When the university does accept contracts where payment is made on the basis of satisfaction of the funding sponsor, we try to limit our risk of non-payment by negotiating the best possible payment schedule and fairest termination clauses. When payment in reimbursement of our costs is delayed or stopped due to sponsor dissatisfaction, the university may exercise its option of terminating the work. Nevertheless, a certain portion of the work performed up to the time of termination would have already taken place. Some of that work may have been paid for by the funding sponsor, but some may not. In such cases, when the university cannot obtain payment in full, it must absorb a loss. In the past, the University has absorbed significant losses of this type. Now, especially in the current fiscal climate, this is not acceptable.
The Vice-President, Research and the Vice-President, Finance have instituted measures to minimize the risk to the university. They have agreed not to approve some research contracts unless the Chair, Director, or Dean is willing to guarantee payment for work performed under the contract, if the sponsor refuses to make payment for expenditures incurred. In most cases, the Department Chair or Faculty Dean will accept this risk by becoming the "guarantor." They do this because to some extent they can control the progress of work and monitor the satisfaction of the sponsor in an effort to reduce the risk of non-payment. In addition, when principal investigators are being paid personal honoraria, these payments will be released by the university only after contract payment is received and with the approval of the funding guarantor.
At the time a research agreement is submitted to the principal investigator and the department for internal approval prior to university signature, the following additional sentence may appear in the signature box for either the Chair, Director or Dean to sign: "I also agree to be responsible for arrangements concerning non-payment of amounts expended, should non-payment occur."
This guarantee is normally required on all research agreements and especially on those whose terms and conditions allow the funding sponsor to withhold payment for subjective reasons, such as unspecified 'satisfaction'. Should it be determined that no administrator is willing to accept this risk and provide a guarantee of non-payment, the principal investigator and the funding sponsor will be informed that unless the terms and conditions are modified, the university will not be able to accept the agreement.
How does SFU manage risk of liability? Am I protected from personal liability?
Risk management in the context of university research has to do with protecting SFU from assuming unreasonable risks associated with what may arise from the research. These include injuries to persons, damage to property, breach of contract, breach of confidentiality, and allegations of copyright or patent infringement. However, there is also the protection of the researcher from personal liability as well.
A researcher should not be at risk of personal liability, but they can be. When SFU accepts a research grant or enters into a research contract with a sponsor, the researchers at SFU are performing the work in their capacity as SFU employees. Thus, they are "protected" from being held personally liable for actions taken in the course of their employment. However, there are times when contracts arrive from sponsoring agencies that name the researcher rather than SFU as the other party to the agreement, requesting that the researcher sign and return it. In such cases, the researcher, by signing the agreement, might be entering an agreement personally while thinking he or she is entering it on behalf of SFU. In circumstances like these, should something go wrong, liability could fall upon the researcher.
Faculty members, as principal investigators for research grants and contracts, are protected in their capacity as SFU employees. The students and individuals who are employed under those grants and contracts are considered the equivalent of University employees for legal and insurance purposes. This automatically provides SFU Liability Insurance coverage to those students and individuals. SFU faculty, staff and employees are provided coverage for claims or legal action that arise from the course of their employment at SFU.
What is indemnity? How is it managed at SFU?
An indemnity is a legal transfer of risk within a contract whereby one party agrees that it will provide compensation for loss or damage already suffered, or that it will secure against loss or damage that may occur in the future. SFU has issued Indemnity Approval Policy AD 3.14 governing in part SFU's ability to grant indemnities. The SFU Indemnity Approval Policy sets out the procedure for reviewing contract language for indemnities and other liability issues.
SFU manages its exposure to risk both by limiting this exposure in contracts through negotiating indemnity language and other such provisions, and by purchasing Liability Insurance in sufficient amounts to protect University employees and the institution itself. The SFU risk coverage summary information can be found on the SFU Safety and Risk Services website.
The university, while recognizing the importance of research, also needs to balance the risks inherent with the research along with the legal liability, indemnification and insurance clauses contained in the contracts being presented to us. In recent years, many organizations, including some government agencies, have increased their attempts to transfer many types of risk to institutions performing research under contracts, in some cases including risks of consequential loss not directly related to the research. As this practice became increasingly common, the need for SFU to institute a formal indemnity approval policy became more apparent.
When an organization that is sponsoring research attempts to transfer certain risks to SFU through the contract, that organization is seeking to reduce its exposure to potential liability. In other words, the sponsor will seek an indemnity from the university. Through that risk reduction, the organization is able to reduce its insurance premiums, administrative costs and legal expenses - all by effecting such risk transfer through the contract.
In some instances, SFU will give indemnities to sponsors of research contracts. Some of the risks that sponsors would like to transfer to SFU through contracts are reasonable, and some are not. It should come down to which of the parties is in a better position to assume the risk. Of course, in many commercial ventures, there might be a trade-off to the party assuming the risk. In contracts that fund research, there is rarely such a trade-off. It comes down to whether assuming the risk is reasonable under the specific circumstances.
SFU will be responsible for its acts or omissions while the sponsor should be responsible for its acts or omissions. Certain government contracts contain "difficult" indemnity clauses that require negotiation. We have had some success in having these deleted from agreements. The primary consideration for a university in determining whether to grant an indemnity is the risk versus reward equation. Assuming liability for resultant loss or consequential damage could potentially result in multi-million dollar claims and legal actions.
Insurance coverage is not the answer to managing risk, particularly "negotiated" contractual risks. Insurance is a risk financing tool that contains exclusions, limitations and deductibles, so insurance doesn't cover everything. The Liability Insurance coverage that SFU maintains is broad in scope and provides protection for a wide variety of potential claims situations. However, research can involve areas of exposure where insurance coverage may not be there, or coverage may only be partial, such as nuclear liability, gradual pollution, and infringement to copyrights, patents, trademarks or violations of other intellectual property rights.
A research contract for a small dollar amount, if written in a certain way, can expose the university to huge potential liability. It is really not the dollar-value of the contract that matters when it comes to risk management issues. That's why all research contracts have to be thoroughly reviewed, irrespective of the amount of funding involved.
The consequences of assumption of liability under research contracts can be so severe that the advantages from accepting the funding are overshadowed. In these situations, it is only reasonable that the contract be modified to reduce or remove the exposure - if necessary by re-negotiating other aspects of the contract before the contract is signed for the university. It is inappropriate for the university to assume certain contractual obligations that involve assumption of unreasonable risks and potentially large liability.
Research Services coordinates with the SFU Risk and Safety Office for approval of residual risks in contracts and agreements.
My research involves field activities. Am I covered or should I obtain independent insurance?
When undertaking field research, there are many risk and safety issues to be considered. SFU Policy GP 17, covers the area of personal safety and risk mitigation for faculty, staff and students participating in university-related research and teaching in off-campus, often remote, locations. The following is a brief outline of insurance issues that should be considered when undertaking field research activities. For more information on risk management, please contact Safety and Risk Services.
- Property Loss or Damage. Direct physical loss or damage to SFU-owned equipment and materials is insured under SFU’s self-insurance program, which covers most situations. Coverage applies worldwide (except for certain restrictions) and is subject to a per claim deductible.
- Personal property. The program does not cover personal property of faculty, staff or students. Independent insurance should be obtained if required.
- Liability. The purpose of liability insurance is to protect against legal liability and lawsuits arising from an accidental or unintended incident affecting someone else's person or property. The university's Commercial General Liability policy includes as insured all faculty, staff, students (and in certain cases volunteers) while performing any activity which is part of their educational or employment duties, including field research. This policy applies on a worldwide basis and insures specifically against bodily injury, personal injury, professional malpractice, death, or damage to property of others. It includes the personal or civil liability of an individual insofar as the conduct which caused the loss was part of the individual's employment or academic duties. It does not include any coverage for criminal liability or willful negligence, which in general is a negligent act conducted on purpose or willfully.
- Accident/Health Insurance. Participants in field research activities should evaluate the required level of accident/health insurance needed to cover potential medical emergencies, both on the job and off. Students and other non-university employees (i.e. those paid from research grants) are not automatically covered with health insurance. Health insurance is an individual responsibility and the level of health insurance coverage for students and research grant employees should be reviewed before undertaking field research. Please ensure your coverage is appropriate to the geographic location and duration in which you intend to work.