As the economic fallout from the pandemic continues to increase, many independent schools in the UK are facing considerable challenges during the coronavirus crisis.
Now more than ever, independent schools must tread carefully when it comes to discussions of fees, weighing up, on one hand, the business’ financial needs and on the other the moral and commercial imperative of acting in good faith towards parents who will, inevitably, be feeling pressures in their businesses.
In this article, Head of Dispute Resolution, Peter Rolph, and trainee solicitor Zaeem Mughal look at the key commercial issues independent school, and the wider education sector, should be considering.
It is likely that many independent schools already have arrangements in place for the provision of educational services. These arrangements may include remote learning using the school’s online portal or through audio or messaging, with Microsoft Teams being used to deliver classes to students.
Independent schools should bear in mind the needs of individual students. In particular, whether any student has difficulties in accessing the remote provisions and if any student needs additional support. For international students, independent schools should consider recording lessons to take into account the different time zones.
Any arrangements should be reviewed regularly and documented as this will demonstrate that the school has fulfilled its obligations under the parent contract.
Your parent contract will likely contain a ‘force majeure’ clause. These clauses are included in the contract in case circumstances outside a party’s control prevents the performance by that party of their contractual obligations. Where such a clause applies, the party in question is released of any liability for its failure to meet its obligations.
Independent schools should seek legal advice about whether to serve notice of a force majeure event. Service of a force majeure notice could encourage parents to avoid or delay payment or it may allow parents to terminate the contract if the school is closed for an extended period. However, it could help protect against claims for damages for breach of contract if the school has failed to provide adequate provision.
Consideration will depend on the school’s particular circumstances, terms of the parent contract and the contracted services provided (and whether these services can be provided remotely.) Any notice served must be carefully tailored to the school’s specific circumstances and parent contract to reflect the sensitivity of the situation.
The government has recently announced that university students in England will still have to pay full tuition fees if their courses are taught online. Many independent schools are also continuing to charge tuition fees as they teach students remotely.
The parent contract may set out the position regarding the obligation to pay tuition fees in the event of closure. Independent schools should also review their parent contract to understand how non-tuition fees (food, transport, boarding and extra-curricular activities) are treated under the contract.
Even if fees are contractually payable, independent schools may be considering reductions in fees. Any decision to reduce fees needs to be weighed against the contractual position, financial position and maintaining a relationship with parents.
Therefore, it is essential to review your parent contract so that practical steps can be taken to protect your interests. Any decision will need to be documented and carefully communicated to parents.
Many independent schools will have contracts with third party suppliers such as cleaning, catering and transport. They may also have lettings scheduled to take place on the school premises.
Independent schools should review all contractual arrangements with third parties to understand their rights to terminate or cancel the contract and to check for any force majeure clauses.
A strict interpretation of the contract may not be the most pragmatic solution, with the emphasis on maintaining a relationship with key suppliers. However, you should seek legal advice before enforcing or varying any agreement or entering into any new agreements so the school’s interests are protected from a contractual position.
Finally, it is important to check your insurance policies to determine what is covered in the event of school closure.
You should also check any business interruption insurance that you may have. This is particularly important for any loss of income that is suffered if your parent contract contains provisions to refund parents or any loss of income resulting from lettings which have been cancelled.
Visit our Coronavirus (COVID-19) Hub for more Leading Insights.
*The information set out in this article is correct at the date of publication (07 May, 2020). The effect of coronavirus on businesses is a fast-changing area and so it is important to obtain legal advice to ensure you are properly protected.
If you have any questions regarding the impact of the Coronavirus upon your business or are seeking up-to-date legal advice for the Education sector, contact Peter Rolph on 01202 294 566 or email PeterRolph@steeleraymond.co.uk.
We will only use this information to handle your enquiry and will not share it with anyone else.