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Contractually Bound: Enforceable Enrollment Contracts without the Drama

By Net Assets posted 11-20-2015 03:41 PM

  
Contractually Bound

Enrollment & Financial Aid |

An interview with education attorney Judith Islas.

Article by Grace Lee

From the November/December 2015 Net Assets

The landscape for enrollment contracts is constantly shifting. As schools strive each year to update their contracts to ensure they are legally enforceable, consistent with their culture and compliant with current standards of best practice, they continue to struggle with issues such as electronic signatures, divorced parents, enforcement and the possibility of perpetual contracts. To get another perspective on these issues, I reached out to education attorney Judith Islas at Liebert Cassidy Whitmore. She shares her thoughts on the latest trends, along with insights from her recent experience working with schools to enforce and litigate enrollment contract terms.

GRACE LEE: What are some best practices for using electronic signatures on enrollment contracts?

JUDITH ISLAS: Using electronic signatures carries both benefits and risks. Electronic signatures are quick and convenient, eliminate unnecessary paper files and often satisfy family preferences to transact business online. But they are also susceptible to challenge and, if not deemed valid, the consequences can be harsh. The cases that have come down regarding enforcement are typically skeptical of electronic signatures. Schools using electronic signatures need to be sure they are scrupulously following federal and state electronic-signature laws. This means schools will need to carefully consider their own practices and, if they use a third party, make sure it meets the requirements of federal as well as state law.

Generally speaking, we recommend schools take at least the following steps:

Require each signatory of the agreement to create a unique user name and password in order to log in.

  • Incorporate a screen where signatories expressly state their agreement to be bound by electronic signature.
  • Incorporate two modes of identifying the signatories to the agreement, such as typing in a name and then clicking “I accept.”
  • Provide an opportunity to cancel the signature before completion.
  • Provide a confirmation screen with an opportunity for the signatory to download, email or print the entire signed agreement.
  • Send an email or hard copy confirming the signatory’s execution of the agreement; ensure that the agreement cannot be altered or edited once executed.
  • Monitor all electronic signatures for compliance with the designated process and keep the electronic paper trail establishing this. If the school uses a third party, obtain and retain the certificate of completion for all electronic signatures.

GL: Divorced or separated parents with various custody arrangements and financial commitments to the school can create a lot of headaches in the enrollment process. What advice do you have for schools to best handle these situations?

“Stay out of it! Getting caught between divorced or separated parents is usually a no-win situation for schools.”

JI: Stay out of it! Getting caught between divorced or separated parents is usually a no-win situation for schools. Rather, we think schools need to explain to parents that when a child is enrolled, the whole family is enrolled. It’s critical for the school to be able to communicate openly and constructively with both parents. To the extent there are disputes regarding custody arrangements or financial commitments, those are between the parents. They either need to work them out directly or through their attorneys.

Sometimes as issues arise, parents need to request additional clarification or orders from the court. The school is not a party to custody agreements and is not in the best position to interpret or enforce them. What the school needs is meaningful collaboration. Of course, there are always bound to be exceptions—such as when there is a restraining order against one parent, or a parent’s rights have otherwise been limited by a court order—but typically we advise schools to be transparent with both parents.

GL: What are some insights and lessons you’ve learned from litigating and enforcing enrollment contracts?

JI: One insight—and this will not come as a surprise—is that enrollment contract language matters. Schools that are careful in crafting clear language that defines parents’ obligations and the school’s rights, and then consistently enforces that language, will be in a good position. Also, schools often wait too long to enforce their enrollment agreements. More often than you might expect, I get calls from schools after the student has already graduated, only to find out the family has not met financial or other obligations for years. At that point, schools have already lost important leverage. Finally, there are public relations and other considerations that will come into play no matter how well the contract is drafted. Schools really are communities, and we work with them to formulate creative resolutions that will avoid the time, cost and potential drama that can accompany enforcing these agreements.

GL: Schools often have language in the enrollment contract that makes the parent(s)/guardian(s) responsible for an entire year of tuition unless written notice of withdrawal is received by a certain deadline. Are these clauses enforceable? If so, what language should schools include to increase the likelihood of enforceability?

JI: Legally these clauses should be enforceable, just like any other contract where a party agrees to pay for some type of service even if they ultimately do not use it or receive the entire benefit of the contract. Yet there is always risk that a court will not enforce the agreement, and parents can appear sympathetic, particularly where a school has been able to replace the student and therefore collect tuition from another family. It’s a good example of why paying close attention to the contract language—and anticipating a situation like this one—is so important.

GL: Some schools have moved toward a perpetual enrollment contract in which students finishing one grade are automatically enrolled for the following year unless the parent(s)/guardian(s) notify the school in writing of a decision not to return. Have you heard of schools using this type of contract? What advice do you have for schools that are considering moving in this direction?

JI: It’s an interesting concept along the lines of moving away from annual agreements for teachers. There are certainly benefits, such as reducing the paperwork that is already overwhelming some families. There are also cons, including that certain terms, such as tuition and fees, typically change every year—and schools may wish to make other changes to the enrollment contract (such as adding an arbitration clause or updating to address new practices or added or amended legal requirements). If this concept is adopted, schools should ensure parents agree the school can make changes annually. While we think there are potential benefits, each school will need to consider the pros and cons.

GL: Many schools struggle with enforcing tuition payment requirements and attempt to include consequences for nonpayment of tuition in the enrollment contract. Is it lawful to withhold grades or transcripts if tuition is not paid? If so, what other consequences can schools implement and enforce?

JI: The laws differ by state. For example, California schools cannot withhold grades or transcripts for non-payment of tuition. Schools can, however, refuse to provide letters of recommendation and other forms. They can also remove a student before he or she is given a grade. Depending on when a school addresses the issue of non-payment, there may be other options.

Dealing with parents who do not meet their financial obligations is difficult. Schools want to be compassionate when there are unfortunate family circumstances such as health issues or loss of a job, but they also need to enforce the tuition payment obligations. Ignoring the situation won’t make it go away. Schools are best served by promptly addressing non-payment issues.

Grace Lee is NBOA’s vice president, legal affairs, and an independent school law attorney who has represented independent schools in various employment and related matters. Contact her at grace.lee@nboa.org.
Judith Islas is a California-based education lawyer with Liebert Cassidy Whitmore (lcwlegal.com). She provides advice to private schools and colleges on employment, student and business issues; represents schools and colleges in state and federal court litigation; and regularly conducts training. Contact her at jislas@lcwlegal.com.


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