An Administrator's Guide to California Private School Law

Chapter 13 - Student Applications And Enrollment Contracts

Any sort of late fee that exceeds a certain amount may be inconsistent with the Unruh Act, which allows late fees but limits the late fee amounts for service contracts that have more than four installments. 2014 The Unruh Act authorizes a late fee charge of no more than $10 if the default period is 10 days or more and authorizes a late fee charge of no more than $15 if the default period is 15 days or more. Late fee charges higher than these amounts may be unenforceable if challenged by legal action. For example, a $75 late fee would be too high and therefore, risks being inconsistent with the Unruh Act. However, schools should be aware that it is not entirely clear whether the Unruh Act applies to enrollment contracts, and thus higher late fees may be enforceable. 4. L IQUIDATED D AMAGES P ROVISION Schools may want to consider including a liquidated damages provision, which establishes the exact amount of damages that the parents or legal guardians will pay if they breach the enrollment contract. For example, if a parent withdraws a student after the cancellation date but before the start of school or early on in the school year, the parent may argue the school will suffer no damages as it can easily replace the student and receive another student’s tuition payment. Including a liquidated damages provision provides the school with the argument that the parents or legal guardians agree at the time the contract is signed that the school will suffer damages if a student is withdrawn after the cancellation deadline. The benefit of this provision is the assurance that the school may be compensated for each enrolled child. Liquidated damages provisions are enforceable under California law unless the damages were “unreasonable under the circumstances existing at the time the contract was made.” 2015 Sisters of the Holy Child Jesus at Old Westbury, Inc. v. Corwin 2016

Parents brought action against a private school seeking to recover the principal sum of tuition and fees after they notified the school their child would not be attending. The court found in favor of the school and upheld the validity of the liquidated damages provision in the enrollment contract. The court noted that the headmaster’s affidavit supported the validity of the liquidated damages provision by stating the school had reserved a place for the student for the school year, the school planned its annual budget based upon enrollment commitments for the following year, and the school made irreversible financial commitments to teachers and staff based upon such commitments.

5. T UITION R EFUND I NSURANCE A ND TILA D ISCLOSURES . Enrollment contracts can also contain tuition refund insurance plans that schools may offer. Schools may require all parents to enroll in a tuition refund insurance plan. If enrollment in such a plan is optional, the contract should have a section for parents to affirmatively opt-in or out of the plan to avoid confusion if a dispute later arises. Some tuition refund insurance plans may be subject to the Truth in Lending Act 2017 (“TILA”) disclosure requirements. The sole purpose of TILA is to promote the informed use of consumer credit by requiring disclosures about terms and costs of credit to standardize the manner in which costs associated with borrowing are calculated and disclosed. Under TILA, a tuition payment

An Administrator’s Guide to California Private School Law ©2019 Liebert Cassidy Whitmore 484