School Commercial Contracts: Do Your Contracts Protect Your School?

Schools seeking to expand and improve streams of revenue may enter into  hire facilities agreements to, for example, hire their sports hall facilities or theatre space to third parties. Many schools are also choosing to enter into collaboration agreements with other schools.

Whilst these contracts vary by their nature, they are all commercial contracts and there are certain provisions which we advise all schools to be aware of to ensure that their position in best protected throughout the life of the contract.

Ensure that key terms are appropriately drafted

There are certain standard key terms which should be agreed between the parties at the outset of the relationship. Whilst these can seem obvious, we frequently see school commercial contracts where these key terms have not been fully considered or appropriate drafted, leading to ambiguity and the potential for disagreement.

Agreeing the party names in most cases should not create difficulties. However, schools should be conscious to give this due consideration as the parties stated in the contract will be liable for the relevant obligations. For example, where a school has created a subsidiary entity for the management of its hired facilities, the school should take particular care to ensure that the appropriate entity is named in the contract.

All too often we see contracts with no specified term, meaning it is not clear how long the contract will last. School commercial contracts should specify a commencement date as well as an agreed minimum or fixed term, to prevent performance continuing indefinitely.

Similarly, pricing is a key term of the contract but can sometimes be overlooked during negotiations. It is vital that school contracts clearly state expectations in respect of pricing and payment. Failure to do so may lead to dispute and risk one party not being paid as expected.

Managing liabilities

It is important to pay attention to liability clauses within school commercial contracts as a well drafted liability clause can help to protect the school’s position if things do not go as expected.

The drafting of liability provisions will be dependent on the school’s position in the contract – a school providing services should include liability provisions limiting the school’s liability to the other party, whilst a school receiving services is likely to instead negotiate an acceptable limit on the supplier's liability to the school (since the supplier is likely to insist on limiting liability).

It is important to keep in mind that not all liabilities can be excluded and wording that purports to do so is void. Further, whilst clauses can oblige a party to compensate the party affected by a breach, the amount cannot be excessive, otherwise these will be regarded as penalty clauses and be void. We can support schools to ensure that such provisions are appropriately drafted.

Make sure your school can terminate

Termination provisions are critical to a commercial contract. However, many school contracts either make it onerous for the school to terminate the contract, or in some cases do not contain termination provision at all.

School contracts should allow for termination by the school where there has been a  material breach of the contract or repeated breaches of the contract. In addition to these termination provisions, we recommend that schools ensure that they have the option to terminate the agreement without cause.

Small but mighty boilerplate clauses

Boilerplate clauses are the clauses which tend to sit towards the end of a contract and can often be overlooked. However, poorly drafted boilerplate clauses can have significant consequences.

The entire agreement clause is one of the most important boilerplate clauses and has been the frequent subject of litigation. The purpose of the entire agreement clause is to prevent the parties claiming that statements made during contract negotiations, but which are not included in the final contract, constitute additional terms of the contract or some kind of side agreement.

In some cases, it may be necessary to make changes to the contract during its term. If an amendment is made without complying with the necessary formalities, the amendment may not be effective or may have unintended consequences. Variation provisions should set out the formalities to be complied with, such as whether written agreement to the variation is required from both parties.

Appropriate drafting of a commercial contract is complex, and failure to get in right can have a reputational, as well as financial, impact on the school. We support schools to prepare commercial contracts which best protect the school, as well as supporting schools seeking to vary their commercial contracts, or exit them altogether.