Friday, August 3, 2018
Watch out for relevant statutes when entering into contracts (but also, read your own contract language)
A recent case out of the Eastern District of Virginia, K12 Insight LLC v. Johnston County Board of Education, Civil Action No. 1:17-cv-1397, is a cautionary tale for being aware of how statutes can affect contracts. But, also, it could have been decided just on the contractual language alone.
In the case, the Board of Education signed an Order Form with K12 Insight that provided for an annual fee for three one-year terms. After signature, the school district realized that it could not afford the final two years of the subscription to K12's software and so attempted to terminate the subscription. K12 sued for breach of contract, alleging that the school district was obligated to maintain its subscription for the full three years.
The court declared the Order Form contract to be void. First, there was a statute that required a pre-audit certification to be affixed to the Order Form in order to ensure that there would be funding for the school district's contract. This contract lacked the pre-audit certification (which maybe explains why there wasn't funding). The court found that the contract was also outside the scope of the superintendent's authority.
But, finally, even if the contract had been properly made, the Board was permitted under the contract's own terms to terminate it if it didn't have sufficient funds. That was exactly what happened here, so the termination was proper.