Like any other organization, nonprofit or otherwise, a church needs to enter into contracts with other organizations as part of its operations. As churches grow or establish long histories, keeping track of contractual rights and obligations can be a big but important job. Contractual rights like warranties can represent significant but short-lived value. And losing track of important obligations to third parties can create significant liability.
Churches that feel they haven’t done an adequate job of tracking their contracts should not feel alone. Many organizations, including highly successful for-profit businesses, do a bad job of keeping tabs on their contracts. It’s a natural tendency of people who negotiate agreements to focus on making the deal, and not on switching to the more mundane task of managing deadlines or keeping tabs on obligations.
There are several ways a church can do a better job of managing its contracts:
- Put someone in charge. It’s always a good idea to designate a specific person who will take responsibility for recording and filing away a church’s contracts. That person can make sure the church as full copies of every contract, and can keep a calendar of important deadlines. The contract manager also becomes a valuable resource for answering questions and tracking down information when problems come up.
- Make a list. Keeping track of contracts can be as simple as using a spreadsheet and a calendar program. Keeping tabs on when contracts are signed, who they are with, and when they will expire can be helpful for ensuring that important relationships are sustained over time and critical obligations aren’t forgotten.
- Read with care. A church should have a policy governing the execution of contracts to ensure that low-level employees and volunteers do not inadvertently make the church responsible for obligations that it does not want. If a contract contains terms that aren’t clear or not well understood, a church should not accept them without talking to an attorney.
- Keep responsible people informed. If a third-party contract contains obligations that will affect how volunteers or rank-and-file employees behave, make sure those people know what those obligations are. For example, a contract might require a church to keep certain information confidential. If a volunteer discloses covered information to friends or on social media, the church may damage its relationship with the third party and, in the worst case, face a lawsuit.
The Church Law Center of California advises religious and secular nonprofits on governance and risk management matters. We are happy to help your church develop a contract management policy that fits your church’s circumstances and needs. Call us today at (949) 689-0437 or reach out to us through our contact page.