What authority do municipalities have regarding contracts?

Municipalities possess the authority to sue or be sued, which is central to their ability to engage in legal contracts. This authority allows municipalities to enter agreements and hold parties accountable within legal frameworks. By being able to initiate lawsuits or defend against them, municipalities can effectively protect their interests, enforce contracts, and seek damages when contractual obligations are not met. This capacity to engage in legal action is a fundamental aspect of their operations, facilitating governance and enabling them to manage public works and services.

Other options address limitations that do not reflect the full scope of a municipality's contracting authority. While municipalities may work with state agencies or negotiate with private firms, they are not restricted exclusively to those interactions. Furthermore, while municipalities can enter into agreements with federal entities, such agreements are subject to specific regulations and may not be as straightforward as implied in the choice referring to binding agreements with the federal government.