If a board member develops a conflict of interest after a contract is signed, is the contract still valid?

TX AG Opinion GA-0351: Does a board member's later conflict of interest void a contract signed before the conflict existed?

Plain-English summary

The Texas A&M University System had an outside-counsel contract with a law firm for intellectual property work, first signed for the 2001-2002 fiscal year and renewed in later years. The version at issue ran from September 1, 2003 to August 31, 2004. In October 2003 a man was sworn in as a member of the A&M Board of Regents, and the next month he joined that same law firm as a partner. So by the time he had both roles, the contract was already in place. The firm kept doing the legal work, and more than $18,000 in bills came due. A&M's general counsel asked the Attorney General two things: did the regent's new financial tie to the firm invalidate the existing contract, and could A&M still pay the firm for the work it had done.

The Attorney General started from the common-law conflict-of-interest rule that a member of a governmental board may not have a personal financial interest in a contract the board enters into. A contract made in violation of that rule is void. But the key point, the opinion stressed, is timing: that rule bites at the moment the contract is formed. A conflict that develops later does not reach back and void a contract that was clean when it was signed. Because the regent was neither a board member nor a partner in the firm when A&M first entered the contract, his later appointment and later partnership did not invalidate it.

On the second question, the opinion concluded A&M could pay the firm for services already rendered under the existing contract. If the board voted to approve those payments, the interested regent had to publicly disclose his interest and recuse himself under Government Code section 572.058(a). The opinion drew a firm line at the contract's edges, though: A&M could not exercise its option to renew or extend the contract, and could not amend it, while the regent remained a partner, because extending or modifying a contract creates a new contract, and a new contract with the firm would run straight into the conflict rule.

Currency note

This opinion was issued in 2005. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Who this opinion affected (as of 2005)

State university and agency governing boards: The opinion held that the common-law conflict-of-interest rule (the Meyers v. Walker line of cases) generally applied to members of state governmental boards, including university boards of regents, except where the legislature had modified it for a particular kind of contract.

The Texas A&M University System Board of Regents: It concluded that the regent's appointment and his joining the law firm did not invalidate A&M's pre-existing contract, that A&M could pay the firm for services already provided under that contract, and that A&M could not enter into, renew, extend, or amend a contract with the firm while the regent remained a partner.

The interested regent: The opinion explained that if the board approved payments under the contract, the regent had to announce his interest and recuse himself under Government Code section 572.058(a), and that violating that section subjected an officer to removal from office.

Vendors and law firms contracting with state entities: It clarified that a firm could still be paid for work performed under a contract that was valid when signed, even if one of its partners later joined the contracting board, but that the relationship could not be carried forward into a new or amended contract.

Common questions

Does a conflict of interest that arises after a contract is signed void the contract?
No. The opinion explained that common-law conflict-of-interest rules have their effect at the time a contract is entered into. A conflict arising afterward does not invalidate a contract that was valid when it was formed.

Could Texas A&M pay the law firm for work it had already done?
Yes. The opinion concluded the common-law rules did not prevent A&M from paying the firm for services rendered under the pre-existing contract, even for work done after the regent joined the firm.

Did the interested regent have to do anything when the board approved payment?
Yes. The opinion said that if the board approved the payments, the regent with the interest had to publicly disclose his interest and recuse himself from the decision under Government Code section 572.058(a).

Could A&M renew or extend the contract with the firm?
No. The opinion concluded the regent's conflict prevented the board from exercising its right to extend the contract, and the board could not amend it either, because under Texas case law a modification creates a new contract, which would violate the conflict-of-interest rule.

Why didn't Education Code section 51.923 fix the problem the way it does for corporations?
The opinion noted that section 51.923 lets a university contract with a corporation despite a regent's interest, but this firm was a limited partnership, so that statute did not apply to it.

Background and statutory framework

Texas courts have long held that a member of a governmental body may not have a personal financial interest in a contract entered into by that body, and a contract made in violation of the principle is illegal and void, both because the officer's interest might cause him to favor the entity and to avoid the appearance of impropriety (Edinburg v. Ellis, 59 S.W.2d 99 (Tex. Comm'n App. 1933, holding approved); Delta Elec. Constr. v. City of San Antonio, 437 S.W.2d 602 (Tex. Civ. App.-San Antonio 1969, writ ref'd n.r.e.); Meyers v. Walker, 276 S.W. 305, 307 (Tex. Civ. App.-Eastland 1925, no writ)). These rules take effect at the time a contract is entered into, and a contract is invalid only where the officer has or shares the authority to contract with the entity in which he is financially interested.

The legislature can change common-law rules and has done so for certain entities and transactions: Local Government Code chapter 171 preempts the common law for local public officials (Tex. Loc. Gov't Code Ann. §§ 171.004, 171.007(a)); Government Code section 404.0211 lets a state agency use a bank as a depository despite certain officer interests; and Education Code section 51.923 lets an institution of higher education contract with a corporation despite a board member's interest, on conditions (Tex. Gov't Code Ann. § 404.0211; Tex. Educ. Code Ann. § 51.923). Members of state governmental boards, including university boards of regents, remain subject to the Meyers v. Walker rules where no such statute applies. The opinion also addressed Government Code section 572.058, the financial-disclosure and recusal statute for officers on boards with policy direction over a state agency, and explained, following Attorney General Opinion JM-671 (1987), that it did not abrogate the Meyers rule for state contracting but did require disclosure and recusal for other board decisions, such as approving payment (Tex. Gov't Code Ann. §§ 572.001(b), (10)(B), 572.058(a), (b), (f); Tex. Const. art. III, § 22; Tex. Educ. Code Ann. § 61.003(10)).

Governance of A&M is vested in the board of regents, which makes the system's rules and may delegate authority to a chief executive officer (Tex. Educ. Code Ann. §§ 85.11, 85.17(d), 85.21(a)). Because the firm was a limited partnership rather than a corporation, section 51.923 did not save a new contract (Tex. Rev. Civ. Stat. Ann. art. 6132b-4.01(a)-(b)), and the opinion distinguished Attorney General Letter Opinion 93-12, where the regent was both a regent and a partner when A&M entered the contract. The opinion relied on the rule that amending or extending a contract creates a new contract (Flagship Hotel, Ltd. v. City of Galveston, 117 S.W.3d 552, 560 (Tex. App.-Texarkana 2003, pet. denied); Boudreaux Civic Ass'n v. Cox, 882 S.W.2d 543, 547-48 (Tex. App.-Houston [1st Dist.] 1994, no writ)), and noted that only the legislature or the courts may abandon the strict Meyers standard (El Chico Corp. v. Poole, 732 S.W.2d 306, 311 (Tex. 1987); Otis Eng'g Corp. v. Clark, 668 S.W.2d 307, 310 (Tex. 1983)). Payment for completed services followed from the contract's continuing validity (Fed. Sur. Co. v. Pitts, 29 S.W.2d 1046, 1049 (Tex. 1930), quoting Pelham v. State, 30 Tex. 426 (Tex. 1867); Tex. Educ. Code Ann. § 85.22).

Citations

Statutes and constitutional provisions:

• Tex. Loc. Gov't Code Ann. §§ 171.004, 171.007(a) (Vernon 1999 & Supp. 2004-05)
• Tex. Gov't Code Ann. § 404.0211 (Vernon 2005)
• Tex. Gov't Code Ann. §§ 572.001(b), 572.001(10)(B), 572.058(a), (b), (f) (Vernon 1994 & Supp. 2004-05)
• Tex. Educ. Code Ann. §§ 51.923, 61.003(10), 85.11, 85.17(d), 85.21(a), 85.22 (Vernon 1996, 2002 & Supp. 2004-05)
• Tex. Rev. Civ. Stat. Ann. art. 6132b-4.01(a)-(b) (Vernon Supp. 2004-05)
• Tex. Const. art. III, § 22; art. XV, § 2

Cases:

• Edinburg v. Ellis, 59 S.W.2d 99 (Tex. Comm'n App. 1933, holding approved)
• Delta Elec. Constr. v. City of San Antonio, 437 S.W.2d 602 (Tex. Civ. App.-San Antonio 1969, writ ref'd n.r.e.)
• Meyers v. Walker, 276 S.W. 305, 307 (Tex. Civ. App.-Eastland 1925, no writ)
• Tex. Workers' Comp. Ins. Fund v. Del Indus., Inc., 35 S.W.3d 591, 596 (Tex. 2000)
• Bathe Halsey Stuart Shields, Inc. v. Univ. of Houston, 638 S.W.2d 920, 927, 930 (Tex. App.-Houston [1st Dist.] 1982, writ ref'd n.r.e.)
• Flagship Hotel, Ltd. v. City of Galveston, 117 S.W.3d 552, 560 (Tex. App.-Texarkana 2003, pet. denied)
• Boudreaux Civic Ass'n v. Cox, 882 S.W.2d 543, 547-48 (Tex. App.-Houston [1st Dist.] 1994, no writ)
• El Chico Corp. v. Poole, 732 S.W.2d 306, 311 (Tex. 1987)
• Otis Eng'g Corp. v. Clark, 668 S.W.2d 307, 310 (Tex. 1983)
• Fed. Sur. Co. v. Pitts, 29 S.W.2d 1046, 1049 (Tex. 1930)
• Pelham v. State, 30 Tex. 426 (Tex. 1867)

Attorney General opinions and letter opinions:

• Tex. Att'y Gen. Op. Nos. GA-0046 (2003), GA-0068 (2003), GA-0087 (2003), JC-0018 (1999), JC-0426 (2001), JM-171 (1984), JM-310 (1985), JM-450 (1986), JM-671 (1987), JM-817 (1987), JM-884 (1988), MW-179 (1980), H-1319 (1978), V-640 (1948), O-2306 (1940)
• Tex. Att'y Gen. LO-93-12; LA-148 (1977)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0351
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2005/ga0351.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

August 22, 2005

Mr. John D. White, Chair
Board of Regents
The Texas A&M University System
Post Office Box C-1
College Station, Texas 77843

Opinion No. GA-0351

Re: Legal status of a state university's contract with a law firm when an individual who became a member of the university's board of regents after the contract was awarded subsequently became a partner in the law firm (RQ-0320-GA)

Dear Mr. White:

Through your general counsel, your predecessor asked about the legal status of a contract between The Texas A&M University System ("TAMUS") and a law firm, when an individual who became a TAMUS regent after the contract was awarded subsequently joined the law firm as a partner.[1] It was also asked whether TAMUS may pay the law firm for services rendered under the contract after the regent joined the firm. Request Letter, supra note 1, at 1.

I. Factual Background

TAMUS contracted for outside counsel services on intellectual property matters with the law firm ("the firm") for the 2001-2002 state fiscal year, renewing the contract in subsequent years. The contract inquired about covered the fiscal year from September 1, 2003, to August 31, 2004. See id. at 1-2. Your predecessor stated that in October 2003, the regent in question was sworn in as a member of the TAMUS Board of Regents (the "board"). In November of 2003, the same regent joined the law firm as a partner. See id. at 2. Thus, the contract at issue predates the individual's appointment to the board and his joining the law firm. See id. at 1. The firm continued to provide legal services for intellectual property matters from November 2003 through June 2004, to the satisfaction of TAMUS. See id. at 2. Billings for that time period totaling more than $18,000 have been submitted to TAMUS with the expectation that they would be paid pursuant to the contract. See id.

II. Questions

The following questions were asked about the contract:

1. What effect, if any, did the fact that a firm partner became a Member of the Board of Regents have on the legal status of the pre-existing contract between the law firm and the A&M System?

2. Is the firm entitled to payment for services it rendered under the agreement subsequent to the date the partner became a regent?

See id. at 1.

III. Common-law Conflict of Interest

A. Summary

Texas courts have held that a member of a governmental body may not have a personal financial interest in a contract entered into by the governmental body. See Edinburg v. Ellis, 59 S.W.2d 99 (Tex. Comm'n App. 1933, holding approved); Delta Elec. Constr. v. City of San Antonio, 437 S.W.2d 602 (Tex. Civ. App.-San Antonio 1969, writ ref'd n.r.e.); Meyers v. Walker, 276 S.W. 305, 307 (Tex. Civ. App.-Eastland 1925, no writ). This office has relied on these authorities in addressing questions about contractual conflicts of interest. See Tex. Att'y Gen. Op. Nos. GA-0068 (2003) at 2, JC-0426 (2001) at 2. A contract made in violation of this principle is illegal and void, because the public officer's personal financial interest in an entity might cause him to favor that entity, thereby interfering with his faithful discharge of public duty. See Meyers, 276 S.W. at 307; see also Delta Elec. Constr., 437 S.W.2d at 609. The common-law doctrine also seeks to avoid the appearance of impropriety. See Meyers, 276 S.W. at 307; Tex. Att'y Gen. Op. No. JC-0018 (1999) at 4.

Common-law conflict of interest rules have their effect at the time a contract is entered into. See generally Tex. Att'y Gen. Op. Nos. JM-450 (1986) at 1, JM-310 (1985) at 2. A contract is invalid under common law only if a public officer has or shares with others the authority to contract with an entity in which he is financially interested. See Tex. Att'y Gen. Op. Nos. JM-171 (1984) at 3, O-2306 (1940) at 2. See also Tex. Att'y Gen. Op. No. JM-310 (1985) at 2 (conflict of interest rules inapplicable to officer with no power to make or influence making the contract).

B. Legislative Modification of the Common-law Conflict of Interest Rules

The legislature may change common-law rules. See Tex. Workers' Comp. Ins. Fund v. Del Indus., Inc., 35 S.W.3d 591, 596 (Tex. 2000); Tex. Att'y Gen. Op. No. GA-0046 (2003) at 3-4. It has adopted statutes modifying the common-law conflict of interest doctrine in various ways. For example, the rules articulated in Meyers v. Walker no longer apply to local public officials, who are now subject to the conflict of interest provisions in Local Government Code chapter 171. See TEX. LOC. GOV'T CODE ANN. § 171.007(a) (Vernon 1999) ("[t]his chapter preempts the common law of conflict of interests as applied to local public officials"). If a local public official has a substantial interest in a business entity or real property, chapter 171 requires him to disclose his interest and cease to participate in a board vote or action that would have a special economic effect on the business entity or value of the real property. See id. § 171.004.

The members of state governmental boards, including the governing boards of state universities, are generally subject to the Meyers v. Walker conflict of interest rules. See Tex. Att'y Gen. Op. Nos. JC-0426 (2001) (state university board of regents); JM-884 (1988) (State Commission for the Deaf); MW-179 (1980) (member of Texas Board of Health); V-640 (1948) (state college board of regents). No statute comparable to Local Government Code chapter 171 applies to state officers, but the legislature has repealed the common law for state-level entities in limited circumstances. For example, Government Code section 404.0211 permits a state agency to contract with a bank as a depository for its funds even though "one or more officers or employees of the agency who have the duty to select the agency's depository are officers or directors of the bank" or have a beneficial interest in the bank's stock. TEX. GOV'T CODE ANN. § 404.0211 (Vernon 2005). A majority of the members of the agency's governing body must vote to select the depository, and the interested officer or employee must not take part in the proceedings. See id. See also TEX. EDUC. CODE ANN. § 51.923 (Vernon 1996) (institution of higher education may contract with a corporation even though one or more members of the governing board is a stockholder or director of the corporation, subject to certain conditions).

It has been argued that the predecessor of Government Code section 572.058 abrogated the Meyers v. Walker rule for state agencies and institutions of higher education. See Tex. Att'y Gen. Op. No. JM-671 (1987) (construing former Revised Civil Statutes article 6252-9b, section 6,[2] now Government Code section 572.058(a)[3]); Request Letter, supra note 1, at 4 n.6. Chapter 572, which establishes financial disclosure requirements for public officers and standards of conduct for public officers and employees, see TEX. GOV'T CODE ANN. § 572.001(b) (Vernon 1994), includes the following provision:

An elected or appointed officer, other than an officer subject to impeachment under Article XV, Section 2, of the Texas Constitution, who is a member of a board or commission having policy direction over a state agency and who has a personal or private interest in a measure, proposal, or decision pending before the board or commission shall publicly disclose the fact to the board or commission in a meeting called and held in compliance with Chapter 551. The officer may not vote or otherwise participate in the decision. The disclosure shall be entered in the minutes of the meeting.

Id. § 572.058(a) (emphasis added).

A state agency for purposes of chapter 572 includes "a university system or an institution of higher education as defined by Section 61.003, Education Code, other than a public junior college." Id. § 572.001(10)(B) (Vernon Supp. 2004-05). TAMUS is a university system within this definition. See TEX. EDUC. CODE ANN. § 61.003(10) (Vernon Supp. 2004-05). A "'personal or private interest' has the same meaning as is given to it under Article III, Section 22, of the Texas Constitution, governing the conduct of members of the legislature." TEX. GOV'T CODE ANN. § 572.058(f) (Vernon 1994). Article III, section 22 provides that "[a] member who has a personal or private interest in any measure or bill, proposed, or pending before the Legislature, shall disclose the fact to the House, of which he is a member, and shall not vote thereon." TEX. CONST. art. III, § 22. While the courts have not construed this provision, commentators have suggested that it leaves to the individual legislator's judgment whether the legislator has a "personal or private interest" requiring disclosure and abstention. See Tex. Att'y Gen. Op. No. GA-0087 (2003) at 2 (citing TEX. CONST. art. III, § 22 interp. commentary (Vernon 1997)); 1 GEORGE D. BRADEN et al., THE CONSTITUTION OF THE STATE OF TEXAS: AN ANNOTATED AND COMPARATIVE ANALYSIS 141 (1977). An individual who violates section 572.058 is subject to removal from office. See TEX. GOV'T CODE ANN. § 572.058(b) (Vernon 1994).

Attorney General Opinion JM-671[4] concluded that the predecessor of section 572.058 did not change the Meyers v. Walker rule so as to allow a state university system to contract with a private entity despite a board member's personal interest in the entity. See Tex. Att'y Gen. Op. No. JM-671 (1987) at 4-8. Attorney General Opinion JM-671 found that neither the statutory language nor the legislative history expressed an intent to modify the common-law rule expressed in Meyers v. Walker. See id. at 6-7. The statute was based on a provision applicable to legislators, who do not enter into contracts on behalf of the state. See id. at 7. The legislature did not view this provision as modifying the common-law prohibition against state contracts in which a member of the contracting board is financially interested, but instead as affecting rulemaking and other regulatory functions. See id. at 7. Section 572.058 does not modify the common-law rule for state officers, although it does apply to other kinds of decisions by a state agency board or a state university governing body. See Tex. Att'y Gen. Op. No. H-1319 (1978) at 2 (considering whether board member's contract with licensee subject to disciplinary proceeding constituted a personal or private interest in proceeding).

C. Argument for Abandoning the Meyers v. Walker Rule

The request letter argues that the Meyers v. Walker rule imposes an overly strict standard that should no longer be applied to public contracts. See Request Letter, supra note 1, at 4, 8-9 (referring to financial disclosure and open government laws that have been adopted since Meyers v. Walker was issued). As we have pointed out, the legislature has modified the common-law conflict of interest law for certain governmental entities and transactions. See TEX. GOV'T CODE ANN. § 404.0211 (Vernon 2005) (state agency's selection of depository bank); TEX. LOC. GOV'T CODE ANN. ch. 171 (Vernon 1999 & Supp. 2004-05) (local public officers' conflict of interest law). Education Code section 51.923, which authorizes an institution of higher education to contract with a corporation despite a regent's personal financial interest in it, was adopted to modify the common-law rule as applied in a particular attorney general opinion. See SENATE COMM. ON EDUCATION, BILL ANALYSIS, Tex. H.B. 1569, 71st Leg., R.S. (1989) (citing Attorney General Opinion JM-671 (1987)). The legislature may change the common-law rule applicable to contracts between universities and partnerships in which university regents are financially interested. And of course Texas courts may modify common law rules on a case-by-case basis. See El Chico Corp. v. Poole, 732 S.W.2d 306, 311 (Tex. 1987); Otis Eng'g Corp. v. Clark, 668 S.W.2d 307, 310 (Tex. 1983). It is for the legislature or the courts to modify or abandon the strict common-law conflict of interest standard of Meyers v. Walker.

IV. Analysis

A. Application of the Common-law Conflict of Interest Rules to TAMUS

The governance of TAMUS is vested in a board of nine regents, which "shall make bylaws, rules, and regulations it deems necessary and proper for the government of the university system." TEX. EDUC. CODE ANN. §§ 85.11, .21(a) (Vernon 2002). The board appoints a chief executive officer who "is responsible to the board for the general management and success of the university system, and the board may delegate authority, establish guidelines, and cooperate with the executive officer to carry out that responsibility." Id. § 85.17(d). "The chief executive officer may delegate his authority if approved by the board." Id. The governance provision vests authority to contract on behalf of TAMUS in the board, even though it has delegated to university administrators the authority to approve contracts involving consideration of less than $300,000.[5] See Bathe Halsey Stuart Shields, Inc. v. Univ. of Houston, 638 S.W.2d 920, 927, 930 (Tex. App.-Houston [1st Dist.] 1982, writ ref'd n.r.e.) (university board of regents' authority to manage university included authority to delegate investment duties to employees and university was bound by acts of employees); Tex. Att'y Gen. Op. No. JM-817 (1987) at 3-4 (a university officer or employee is authorized to contract for the university only because the board of regents has adopted a rule, regulation, or order delegating such power). Cf. Tex. Att'y Gen. LA-148 (1977) (employment of regent's niece by state university would violate the nepotism statute even though the board of regents had delegated employment power).

The TAMUS Board of Regents is subject to common-law conflict of interest rules, except where legislation modifies those rules for a particular kind of contract. See Tex. Att'y Gen. LO-93-12; Tex. Att'y Gen. Op. No. JM-671 (1987). Education Code section 51.923 authorizes TAMUS to contract with a corporation despite a regent's personal financial interest in it, but the law firm in this case is a limited partnership.[6] See generally Request Letter, supra note 1, at 1. Thus, section 51.923 does not apply to a contract between TAMUS and the law firm. Attorney General Letter Opinion 93-12, which dealt with a proposed contract between TAMUS and a law firm operating as a partnership, concluded that TAMUS could not contract with a law firm in which a TAMUS regent was a partner. See Tex. Att'y Gen. LO-93-12, at 3. The regent's personal financial interests in the proposed contract, consisting in his salary from the law firm and his share in the firm's profits and losses, prevented the TAMUS Board from contracting with the law firm. See id. at 2-3; see also TEX. REV. CIV. STAT. ANN. art. 6132b-4.01(a)-(b) (Vernon Supp. 2004-05) (partnership provisions). Attorney General Letter Opinion 93-12 does not answer the question before us, however, because there is a crucial difference between its facts and those of the present request. Unlike the situation here, the TAMUS regent at issue in Letter Opinion 93-12 was a regent and a partner in the law firm at the time TAMUS entered into the contract.

B. Effect of a Regent's Conflict of Interest on a Pre-existing Contract with a Law Firm

The conflict of interest that your predecessor inquired about did not exist when TAMUS entered into the contract with the law firm. A conflict of interest arising after the contract was made does not invalidate it. See Tex. Att'y Gen. Op. Nos. JM-171 (1984) at 3, O-2306 (1940) at 2. Thus, the individual's appointment to the TAMUS Board and his joining the law firm did not invalidate TAMUS's pre-existing contract with the law firm. However, TAMUS may not enter into another contract with the law firm while the regent remains a partner in the firm. The regent's conflict of interest prevents the TAMUS Board from exercising its contractual right to extend the contract for an additional twelve-month period. See generally Request Letter, supra note 1, at 1. Nor may the board amend the contract in which the regent is interested. See Flagship Hotel, Ltd., v. City of Galveston, 117 S.W.3d 552, 560 (Tex. App.-Texarkana 2003, pet. denied) (holding amendment to lease created a new lease for the purpose of the maximum lease term allowed by Local Government Code section 307.023); Boudreaux Civic Ass'n v. Cox, 882 S.W.2d 543, 547-48 (Tex. App.-Houston [1st Dist.] 1994, no writ) ("A modification to a contract creates a new contract that includes the new, modified provisions and the unchanged old provisions.").

C. Whether TAMUS May Pay the Law Firm for Services Rendered Under the Contract

We have already determined that the regent's joining the law firm did not invalidate the TAMUS contract with the law firm. TAMUS may thus fulfill obligations it incurred under the contract before its termination on August 31, 2004. See generally Fed. Sur. Co. v. Pitts, 29 S.W.2d 1046, 1049 (Tex. 1930) (a contract is a "deliberate engagement between competent parties . . . to do, or to abstain from doing, some act") (quoting Pelham v. State, 30 Tex. 426 (Tex. 1867)). Common-law conflict of interest rules do not prohibit TAMUS from paying the law firm for the services it rendered under the contract after the regent joined the law firm. If the board approves the payments, the regent with an interest in the contract must announce his interest and recuse himself as required by Government Code section 572.058(a). See TEX. GOV'T CODE ANN. § 572.058(a) (Vernon 1994); see also TEX. EDUC. CODE ANN. § 85.22 (Vernon 2002) (procedure for paying TAMUS expenditures by vouchers approved by the president of the board or by an officer or officers designated by him in writing to the comptroller).

Your predecessor asked several more questions based on the assumption that "contracts made prior to appointment of a board member [may] be voided for no reason other than the fact that the member may benefit from their continued existence." Request Letter, supra note 1, at 9. In view of our conclusions to the first two questions, we need not address the remaining issues that were raised.

SUMMARY

Common-law conflict of interest rules do not invalidate a contract formed before the conflict arose. When The Texas A&M University System had previously contracted with a law firm, the fact that a university regent was appointed after contract formation and subsequently joined the law firm as a partner did not invalidate the contract. Common-law conflict of interest rules do not prevent the university from paying for services that the law firm provided under the pre-existing contract after the regent was appointed to the board and joined the law firm. The Texas A&M University System may not enter into another contract with the law firm while a regent is a partner in the firm.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

BARRY R. McBEE
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Susan L. Garrison
Assistant Attorney General, Opinion Committee

Footnotes

[1] Letter from Mr. Delmar L. Cain, General Counsel, The Texas A&M University System, to Honorable Greg Abbott, Texas Attorney General (Feb. 10, 2005) at 1 (on file with Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] See Act of May 28, 1973, 63d Leg., R.S., ch. 421, § 6, 1973 Tex. Gen. Laws 1086, 1093.

[3] See Act of May 4, 1993, 73d Leg., R.S., ch. 268, § 1, 1993 Tex. Gen. Laws 583, 640-41 (adopting nonsubstantive revisions of certain statutes relating to state and local government).

[4] Attorney General Opinion JM-671 was requested by TAMUS.

[5] See Texas A&M University System Policy Manual § 25.07, ¶ 14(2), available at http://sago.tamu.edu/policy/25-07.htm (visited May 3, 2005).

[6] Our opinion addresses a specific type of business organization and we do not consider whether the conclusion would differ if the law firm were organized differently.