Each year, school district business offices are tasked with negotiating a variety of commercial contracts necessary to operate the school district. In most cases, the starting point in these negotiations is the vendor’s boilerplate contract, filled with terms blatantly unfair to the school district. These boilerplate contracts often contain one-sided commercial terms in favor of the vendor, or worse, contain terms illegal in school district contracts. Executing these boilerplate contracts can leave the school district open to criticism from the New York State Comptroller, or with limited recourse in the event the vendor fails to perform under the contract.
Below are five areas which should be closely reviewed when negotiating contract terms with vendors:
1. Remove Illegal Contract Terms
Numerous laws which govern school contracts are often not considered when vendors’ boilerplate contracts are designed. For instance, in most cases, schools are prohibited from making payment until materials have been received or services have been rendered. Additionally, most school contracts may not bind future boards. This means most contracts may not contain provisions which lock schools into a multi-year term with no termination rights. It is important that boilerplate contracts are revised to comply with the various laws that govern school contracts.
2. Indemnification / Liability Limitations
Vendor contracts often contain one-sided indemnification clauses in favor of the vendor, and liability limitations severely restricting schools’ recourse when liability is caused by the vendor. While these terms can seem insignificant, their impact can be catastrophic in the event legal action becomes necessary. Based on the large number of contracts each school enters into annually, the chance that one of the contracts leads to some form of liability is considerable. Schools are well-advised to require indemnification and liability provisions which protect the school district in all contracts.
Protecting the safety of students and staff is integral in all contracts, especially those which involve services performed on school grounds. Commissioner's Regulations and Education Law require fingerprinting of vendors’ employees in certain circumstances, including contracts where vendors’ employees will have face-to-face communication or interaction with students more than five days during the school year. It is important all school contracts incorporate fingerprinting obligations as required by law, or as otherwise needed to protect students and staff.
4. Data Security and Privacy
Most vendors’ boilerplate contracts fail to comply with the numerous legal requirements governing data security and privacy. For example, in most cases, where a vendor may receive student data or teacher or principal data, the contract must comply with Part 121 of the Commissioner’s Regulations. These contracts must include several components, such as the school’s parents’ bill of rights for data privacy and security, certain “supplemental information,” and the vendor’s “data security and privacy plan.” Schools and vendors that enter into non-compliant contracts could face liability in the event of a data breach or other data security violation.
5. Force Majeure
The COVID-19 pandemic has highlighted the importance of force majeure contract terms. Vendor friendly force majeure provisions have led to unconscionable outcomes, such as forcing parents to pay transportation and lodging costs for student trips that were cancelled. Boilerplate force majeure terms should be revised to fully protect the school district in the event services cannot be performed.
If you have any questions or need any assistance reviewing your school’s commercial contracts, please contact Jeff Lewis at jmlewis@ferrarafirm or at one of the telephone numbers listed below.