We may be little more than halfway through the school year, but private schools everywhere are setting their sights on enrollment for the 2014-2015 academic year. A recent court case from Ohio serves as a timely reminder that enrollment contracts must be properly worded and carefully enforced.
In April 2006, Nicholas's parents signed an enrollment contract for him to attend Western Reserve Academy, a $34,000-per-year boarding school in Hudson, Ohio. See Western Reserve Academy v. Franklin, 999 N.E.2d 1198 (Oh. Ct. App., 5th Dist. 2013). The contract required the parents to acknowledge that if they canceled after July 1st but before September 1st, they would remain obligated to pay half of the year's tuition. Beyond September 1st, they would have to pay the entire tuition in the event of absence, dismissal or withdrawal. On October 26th, the parents withdrew Nicholas, citing a custody dispute with his biological father. The parents had already paid a small portion of the tuition, and the tuition refund insurance plan they had purchased paid about half of the balance. The school sued for the remaining $9,322.98.
The trial court sided with the parents. The court found that it was impossible for Nicholas's parents to perform their side of the bargain and that the enrollment contract acted as an unconscionable, illegal penalty. However, the Ohio Court of Appeals reversed the trial court's decision. Applying standard contract law, it found that there was no evidence of lack of meaningful choice or an unequal bargaining position when the parents signed the enrollment contract. The requirement they pay the full tuition was not an illegal penalty, but rather recognition by the parties that if the contract were breached, it would be hard to calculate the school's damages and that full tuition was a reasonable approximation. There also was no evidence that the custody dispute rendered the parents' performance impossible.
Although most state courts, including those in Connecticut, have ultimately enforced enrollment contracts like this one, there is risk that a judicial fact-finder will be swayed, at least initially, by influences outside of the contract. Some parents have argued persuasively that requiring parents to pay full tuition for late cancellation or early withdrawal where schools have waiting lists of students gives the school an unfair windfall. Such arguments can drive up litigation costs, create bad legal precedent if not corrected on appeal, and distract a school from its educational mission. A leading case in Connecticut upholding a school's right to collect its full, unpaid tuition under an enrollment contract is St. Margaret's McTernan School, Inc. v. Thompson, 31 Conn. App. 594 (1993).
To minimize the impact of enrollment contract disputes and avoid costly and distracting fights in court, schools should remember these "DOs and DON'Ts":
For more information, contact Giovanna Tiberii Weller at 203-575-261 or firstname.lastname@example.org.