Court Upholds Parent’s Obligation To Pay Full Tuition After Enrollment Agreement’s Cancellation Date

CATEGORY: Private Education Matters
CLIENT TYPE: Private Education
DATE: Apr 25, 2024

Hawken is a college preparatory day school located in Ohio.  On January 15, 2021, Sandra Machado electronically executed two enrollment agreements with Hawken on behalf of her children, G.M. and J.M. for the 2021-2022 academic school year.  At the time the agreements were executed, Machado paid deposits totaling $3,000.  The Enrollment Agreements were countersigned by Hawken.

The Enrollment Agreements contained express provisions concerning the cancellation of enrollment, including that the parents are liable for the entire year’s tuition and fees unless canceled on or before May 1, 2021.  The Enrollment Agreement also contained a provision that if enrollment is canceled between May 1 and before July 1, 2021, the parents are obligated to pay 50% of the annual tuition fees; if enrollment is cancelled after July 1, 2021, the parents are obligated to pay 100% of the annual tuition and fees.  The enrollment agreement also contained a finance charge provision, stating that the parents must pay a finance charge on the outstanding balance equal to 0.5% for each month the balance remains outstanding (up to 6.17% per year).  The Enrollment Agreement stated that the total amount due, including the finance charges, were considered liquidated damages between the parties of the agreement.

On July 21, 2021, Machado sent an email to Hawken’s Director of Flexible Tuition and Associate Director of Enrollment, notifying Hawken she was cancelling the children’s enrollment for 2021-2022.

On March 20, 2022, Hawken filed a civil complaint, alleging that Machado failed to make payments and owed the School $56,800.  The School filed a motion for summary judgment, arguing Machado was liable for the entire year’s tuition and fees for each student based upon the language in the enrollment agreement and Machado’s failure to provide written notice of cancellation before May 1, 2021.  Hawken argued that the Enrollment Agreement’s cancellation provision and the agreed-upon damages set forth within it contained a valid and enforceable liquidated damages clause.

Machado argued that she was entitled to judgment because Hawken provided no educational services to her children for the 2021-2022 academic year, the cancellation provision did not apply because the children were enrolled before May 1, 2021, and the demand for $56,800 was an unenforceable penalty and not a valid amount of liquidated damages.

The trial court ruled in favor of the School, entering judgment in the amount of $56,800 with an interest rate of 6.17%, plus costs.  Machado appealed.

On appeal, Machado argued that the trial court should have stricken Business Analyst Debra Green’s affidavit from the School’s motion for summary judgment because it was a “sham bordering on frivolous.”  Green’s affidavit provided factual information about Machado’s disenrollment and described the School’s multi-year budgeting process, including the considerations given to pooled students’ net tuition revenue.  The affidavit stated there were no students on the waitlist in the two classes that Machado’s children were enrolled in.

The Court of Appeals concluded that Green’s affidavit (1) authenticated the dates the enrollment agreements were executed; (2) authenticated the date Machado provided notice of enrollment; (3) verified Machado’s failure to pay; and (4) generally described Hawken’s budgetary process.  The Court of Appeals found no inconsistency between her affidavit and deposition, and did not interpret the affidavit as establishing Green as an expert in the field.  The Court of Appeals found no evidence that the affidavit was a “sham.”

Machado also argued that she was entitled to summary judgment because her materials show she had no obligation to comply with the deadlines in the Enrollment Agreement and that the liquidated damages clause was unenforceable as a penalty.

It is not disputed that Machado electronically executed the Enrollment Agreements and subsequently canceled them after the cancellation period had passed.  The Court of Appeals concluded that the contract was clear.  A parent who enrolls their child before May 1, 2021, was liable for the entire year of tuition, unless a written notice is provided on or before May 1, 2021.  The School reserved a spot for the Machado children in exchange for the deposit and a promise to pay the balance later that year.  Machado’s ability to unilaterally repudiate the agreement without further payment obligations expired on May 1, 2021.

In terms of the liquidated damages provision, the Court of Appeals found the amount reasonable and not to be a penalty.  The Court considered Hawken’s multi-step budgeting process, which relies extensively on projected enrollments and pooled student net tuition revenue, which is used to pay for staff salaries and benefits, department budgets, student materials, maintenance, improvements, and utilities.  The Court of Appeals found that the School makes irreversible financial commitments to teachers and staff based on the enrollment commitments.

The Court of Appeals considered that Machado was familiar with Hawken’s enrollment process and there was no evidence she was pressured or coerced into executing the Enrollment Agreements.  The Court of Appeals found the cancellation date to be reasonable.  It found it reasonable that the damages Hawken suffered to be proportional to the full tuition.

The Court of Appeals upheld the trial court’s ruling.

Note: This case is another example of the importance of a well-crafted enrollment agreement, especially the language about liquidated damages.  Here, the Court allowed the School to collect the full tuition amount for both students, even though neither student attended the upcoming school year. 

Hawken Sch. v. Machado (Ct.App.) 2024-Ohio-1060.

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