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Avoiding Traps for the Unwary in College and School Vendor Contracts

What can an educational administrator do when a vendor performs poorly under a long-term contract?  Unless the college or school has tightened its procedures for contract drafting and approval, the answer may be “not much”.  More than a few educational institutions have tried to cancel contracts with underperforming suppliers - ranging from yearbook publishers to laundry companies to phone vendors - only to confront a form vendor contract lasting far into the future and providing no right to cancel.  Aside from multi-year terms, these contracts may have automatic renewal clauses, technical jargon, and microscopic print.  A non-administrative employee, such as a yearbook or drama faculty advisor or cafeteria manager, may have signed the contract for the school.  This employee may have inadvertently bound the school for years, since the vendor will say (with good reason) that the employee had apparent authority to act for the school.

In this situation, a school has two options - one short-term and one long-term.  The short term option is to renegotiate the specific contract or cancel the contract and litigate a breach of contract case.  Litigation will be costly, but the school will have taken a stand that it will no longer acquiesce to burdensome agreements.

The longer term, practical option is to tighten up on the procedures for drafting and signing contracts.  Here are some steps that colleges and schools can take:

  • Centralize all review, approval, and signature of contracts with the business office.
  • Notify both outside vendors and in-house personnel that business office approval and signature are required for all contracts and that all non-conforming future contracts will be invalid.
  • Insist on shorter term contracts with rights to cancel at will, or for cause, or for either party’s financial distress.
  • End all “evergreen” clauses that renew the agreement automatically if a party misses a deadline for advance notice of non-renewal.
  • Simplify the contract by requiring vendors to put all terms in one document, rather than having separate purchase, license, and service agreements.
  • Resist the vendor’s attempt to burden-shift to the institution through warranty disclaimers or indemnity clauses.
  • Insist that the contract be governed by your home state law. The contract will be performed at your site, and should not be subject to another state’s laws.
  • Insist that all disputes be resolved in your jurisdiction, preferably by arbitration, rather than in a remote location such as the vendor’s home state or city.
  • Use your own standard contracts for outside speakers, concerts, or hosted events such as weddings.
  • Preserve the school’s rights to use intellectual property, such as the right to stream or rebroadcast or copy published items.

It’s also important to make sure that contracts are in plain English.  Pennsylvania’s plain English law applies only to consumer contracts, but this limitation should not prevent a college or school from insisting on a clear, readable contract.  A clear, well written contract should address the basic questions of who (the parties’ identities), why (the reasons for the contract, generally in the recitals), what each party will do, when and where the parties’ performance will take place, and how the goods and services will be delivered and paid for.  Then the contract should address these same questions if it becomes necessary to end the relationship.  Finally, the contract should specify how notice is given, whether the contract may be assigned, and how to amend the agreement, and should state that the written contract is the parties’ entire agreement that supersedes all other understandings.

Most educational institutions are either government units or independent nonprofits, responsible to either taxpayers or donors (as well as accrediting and licensing agencies).  Educational institutions are also businesses, whether or not they regard themselves as such.  Many colleges and schools are the largest employers in their geographic areas.  In addition to imposing cost controls through the bidding process, it makes sense to standardize and streamline the contracting process, so the institution follows sound business practices and is on a level playing field with all its suppliers.

If you have questions about Education Law or vendor contracts, please contact Thomas D. Rees at (610) 275-0700 or trees@highswartz.com. The experienced lawyers in our Education Law practice provide a full range of legal services to educational institutions in Bucks and Montgomery counties, ensuring that our clients can focus on their primary mission.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

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