This article is the first in a series on effective contracting practices for charter schools. We begin by addressing problems that commonly arise. Subsequent columns will address principles, pitfalls, and effective practices regarding specific types of contracts.
A charter school and a technology contractor sign a contract by which the contractor agrees to assess the school's technology needs, prepare a technology plan, and submit an e-Rate application to the federal government. Over time, the school wishes to discontinue the contract because the contractor has not performed according to expectations. Consequently, the contractor demands that the client pay early withdrawal penalty fees. The contract, in confusing terms, essentially gives the contractor the opportunity to terminate the arrangement but no reciprocal right for the client to do so.
Whether and how a client may legally "back out" in such a case depends on how the contract is drafted and what factually transpired. Unfortunately, the technology contract I mention exemplifies common problems that arise when charter schools enter into contracts. These include contracts for employment, facilities, professional consulting, and support services. The types of problems are as varied as the types of schools.
Many problems arise from general mistakes at the start. These include contracts that
- are drafted by the contractor, rarely modified, and one-sided (favoring the contractor);
- are drafted by lay people who have borrowed someone else's template or copied and pasted provisions from a variety of sources;
- are never drafted (and should be): the parties entering into an "informal" or "gentlemen's" arrangement that should have been specified in writing.
Specific problems include contracts that are:
- vague-the failure to include specific expectations, quality standards, and timelines (e.g., when will the services be delivered, will there be opportunity for review, what happens if there is non-delivery or inadequate performance?)
- inconsistent-inadvertent or confusing clauses that contradict one another (e.g., do the obligations begin when the contract is signed or following the occurrence of a specific event?)
- incomplete-the failure to include key provisions (e.g., how will disputes be resolved and in what jurisdiction; who will pay legal expenses?)
- confusing-terms full of "legalese" and/or convoluted text (e.g., what is that "WHEREFORE" there for?)
- don't terminate-the absence of any clear terms of contract termination and non-renewal (E.g., how much and what kind of advanced notice is required to terminate? On what grounds? Who decides?)
- costly-the failure to adequately address and prevent hidden and punitive costs (e.g., what is the cost for failing to give timely notice of nonrenewal? What costs accrue following a particular event?)
There are general steps to avoid these problems, many of which simply require common sense (which can go AWOL in the hurriedness of school operations).
- Be cautious and deliberate when considering contractual obligations.
- Ensure a reasonably safe review process with proper safeguards.
- Calculate the full and potential costs of each contract.
- Have an attorney review (and draft, as necessary) any new contract.
- Establish a school Contracts and Compliance Committee to periodically review existing contracts, obligations, and future contract needs.
Effective contracting practices require a basic understanding of numerous other contracting principles, pitfalls, and practices. These will be addressed in subsequent "Law Matters" columns.