Coronavirus Contract Law

University Liability for Dorm Room Evictions

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(Post coauthored with Caprice Roberts.)

The COVID-19 pandemic will lead to a great deal of litigation concerning contractual nonperformance, as well as many hypos on any 1L contract exams that may be remotely administered. One question of particular interest to those in universities is whether universities that have required most or all of their students to leave their dormitories will need to refund money paid for the term. Another question is whether universities conducting distance learning are breaching tuition continuity of instruction, but liability for failing to provide contracted-for room and board seems to be more likely. Students are already making such demands.

A number of law firms have produced useful overviews of the general applicable law. The first question is whether there is a force majeure clause in the relevant contract. If so, the question becomes whether COVID-19 in fact counts as a "force majeure." Eugene's neologism "force mineure" highlights that COVID-19 differs from acts of God like hurricanes and earthquakes, but perhaps not in a way that the courts will think meaningful. Of course, some contracts might contain more specific definitions of "force majeure," or specify other conditions in addition to "force majeure," such as "epidemic."

We haven't performed a systematic survey of university housing contracts, many of which are not easily found online. It appears that Pepperdine's lawyers win the foresight award, having explicitly provided in their contract, "Refunds will not be granted for temporary suspension of housing services that result from an emergency, act of God, force majeure, or other exigency." Similarly, Stanford's contract provides, "The university assumes no responsibility for failure to perform any terms or conditions of this Residence Agreement due to any force majeure. For purposes of this Residence Agreement, the term 'force majeure' shall mean … pandemic …." Perhaps it's not entirely clear, however, that "assumes no responsibility for failure to perform" means "will not give refunds in the event that students are forced to leave their dorms."

The relatively small number of search results turning up such clauses, however, suggests that many University housing contracts do not contain them. Harvard's housing contract, for example, appears to have no applicable provisions. Perhaps this is why Harvard has informed students that it will prorate room-and-board costs. Our own university has similarly promised, "Residential students will receive a credit to their student account at the nightly rate of their unit type for the period in which the university is operating under the instructional continuity period." Of course, if all universities without force majeure provisions take such positions (or allow students to stay in their residence halls, even if recommended not to do so), litigation might be averted. But some universities have been less clear, at least on their websites (e.g., here and here).

If there is no force majeure clause, or if the clause is ambiguous, then universities have a potential fallback: the doctrine of contractual frustration. Saul Litvinoff offers this explanation:

Frustration arises when unforeseen events, occurring after the time of contracting, render performance either legally or physically impossible, excessively difficult, impracticable, expensive, or when they destroy the known utility which the stipulated performance had to either party. In the latter instance, that is, when unforeseen events do not so much make the performance impossible as they make it impossible for the parties to acquire or enjoy the advantage for whose acquisition or enjoyment they entered the contract, the expression 'frustration of contract' becomes synonymous with 'frustration of purpose.'

Saul Litvinoff, Force Majeure, Failure of Cause, and Theorie de L'Imprevision: Louisiana Law and Beyond, 46 La. L. Rev. 1, 10-11 (1985). The problem for universities is that contractual frustration is narrowly applied, and it is difficult to see how a housing contract becomes impossible to perform, at least unless a state mandates that students leave university housing. Perhaps a university can argue that without in-person education, the "known utility" of student housing is lost, but student housing's utility is not all in its proximity to classes. Perhaps a university's strongest argument is that performance is impossible because keeping students in their crowded housing would be unsafe, to the students and to the community. It helps that this does appear to be the justification for university nonperformance, whether or not the students or the community in fact are better off returning to their respective homes and communities.

Perhaps the most interesting question is what happens if contractual frustration doctrine applies. This does not necessarily mean that the university is free of the obligation to produce refunds. Rather, the law of restitution applies. The theory is that in the absence of a contract, both parties need to be returned to the status quo ante, to the extent possible. Let's consider how this would work in an ordinary service context:

Smith promises to paint Brown's factory for $100,000, a fire destroys the factory after Smith has incurred costs of $30,000 and received progress payments of $20,000. Should Brown get back any of his $20,000? Should Smith be compensated for any of the costs that he has incurred? …. The American and post-Fibrosa English default rule would return Brown's $20,000, and, maybe, require that Brown compensate Smith for at least some of his costs incurred in reliance.

Victor P. Goldberg, After Frustration: Three Cheers for Chandler v. Webster, 68 Wash. & Lee L. Rev. 1133, 1135-36 (2011). A plausible calculation is that students would receive a refund on their housing but would then have to pay fair market value for any housing actually received. It seems unlikely that the university has any reliance analogous to the costs of Smith in the above example. So the end result may be more or less the same as if the university reimburses students pro rata.

In his article, Goldberg suggests that we should return to the regime of Chandler. That case dealt with contracts for viewing the coronation procession of Edward VII, frustrated when the procession was postponed as a result of appendicitis. Its rule was to let everything lie where it was, so payments already made would not be refunded, and there would not be any reimbursement for, say, expenses undertaken by those renting out their premises making them suitable for use. If the old rule applied today, then a university successful in convincing a court that contractual purpose was frustrated would likely be able to escape obligation to refund student money (but would be out of luck in the unlikely event that students had not yet paid). The virtue of that rule is that it is likely to lead to less litigation.

Modern restitution law would not favor a return to the old approach. Public policy reasons may well justify excusing contractual breaches and releasing universities from contractual obligations. Restitution's goal is to undo any unjust enrichment. Here, if frustration of purpose applies, the contract comes to an end and the university has its dormitories back in their possession while students are out monies paid for the whole term. A pro rata refund would rectify the unjust enrichment.

This discussion does not address all possibly relevant issues, let alone variations in law from state to state. State landlord tenant law may play a role. Meanwhile, courts might consider public policy concerns. Ordinarily, public policy would come into play in argument that a contract might be void for public policy grounds, but one imagines that courts might be generous to universities on the ground that public policy made their actions necessary. Dave Hoffman has relatedly argued that courts should not enforce cancellation fees imposed by hotels on organizations cancelling conferences.

(Our views, of course, do not necessarily represent those of George Washington University.)

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  1. A more interesting question will be the applicability of local and state landlord-tenant law. There isn’t a lot of appellate case law on the subject that I could find from a quick search (which isn’t surprising seeing most of these cases, if they become a case at all, are probably resolved out of court or in minor courts that are not courts of record.)

    In cruising around the internet last night, I saw on MA lawyer looking for advice on the applicability of such laws for a Harvard student who was staring down an eviction deadline tomorrow. Generally such laws frown on “self-help” evictions as does common law public policy. And I don’t see much of argument that traditional landlord law does not apply to university housing. Other then the educational aspect, every other quality of such housing is about the same as a rental in the surrounding community.

    If I were a judge with a preliminary injunction motion sitting on my desk, I would be skeptical that the university has the power under the law to just up and evict students without some kind of at least real notice. In this modern age, just assuming students can move back in with parents or relatives is fairly antiquated. For many at a college, student housing is their primary and only residence. Public policy tells us that it is better for one to stay in housing, even if they are there in violation of contract, then have that same person be homeless and on the streets.

    1. The Ohio Landlord Tenant Law [Revised Code 5321.01] says:

      “Residential premises” includes a dwelling unit that is owned or operated by a college or university.”

      It has a pre-eviction provision just for colleges:

      “5321.031 College or university student tenant rental agreements.
      A college or university may terminate a rental agreement with a student tenant prior to the expiration of the term of the agreement and require that the student vacate the dwelling unit only when the termination follows a hearing in which it was determined by the college or university that the student violated a term of the rental agreement or violated the college’s or university’s code of conduct or other policies and procedures. The hearing must be preceded by a written notice to the student, must include a right to be heard, and must otherwise comply with the college’s or university’s procedures for disciplinary hearings. The written rental agreement must specify the conditions under which the rental agreement may be terminated and specify the college’s or university’s notice and hearing procedures that will be followed in making a determination under this section.”

      1. Sounds reasonable and like it follows most landlord-tenant law models based upon common law. A neighbor down the street had to take in a son of a friend because the friend had no room in their house. The son (a student) was reporting that the university was threatening to shut off power to dorms that were not vacated. The deadline for them to leave was today at 5. He was one of the last ones out and said a handful of students were planning on staying because they had no where else to go.

      2. In this case, the students did not violate any rules. That provision you quote can not apply here.

        The university also must beware the laws making it illegal for landlords to lock out a tenant without an eviction notice in hand.

      3. Ohio State University is requiring students to vacate OSU residential housing by March 22.

    2. Even more interesting will be situations where the college or university REQUIRED the student to reside in the dorm. For example, UMass Amherst requires freshman to live on campus and automatically bills them for the room & board. Such policies are not uncommon.

      While the motivation is often financial, the “auxiliary fee” revenue often making up a significant portion of the institution’s budget, the rationale is that this “co-curricular experience” is an essential part of the college experience.

      Well, then, there is a larger portion of the contract being breached here — it isn’t just the room & board fees but the tuition which needs to be refunded. After all, the product offered was in-person instruction, not an arguably inferior distance learning experience.

      But the real problem is that a lot of colleges simply DON’T HAVE THE MONEY — they will go bankrupt if forced to refund half a semester’s worth of room & board fees, let alone pro-rate tuition.

  2. “Perhaps this is why Harvard has informed students that it will prorate room-and-board costs. ”

    Maybe their mammoth 35-40 billion endowment led them to the prudent course.

    1. Their endowment is yuuuge! No wonder so many students want to get some of it.

  3. Hopefully, the schools will at least forward the student loan payment invoice letters so those sent home are not held delinquent in payment.

  4. The other problem is students who basically consider their dorm their home, because they have nowhere else to go.

  5. “Perhaps a university’s strongest argument is that performance is impossible because keeping students in their crowded housing would be unsafe, to the students and to the community.”

    To use a claim of health hazard, wouldn’t the university have to show the dorms are distinctly different than other high rise apartment communities of equal or greater population and perhaps equal or greater density?

    1. Depends on the university housing type. It would be pretty easy to differentiate dorm style housing that still includes shared bathroom and shower facilities for the entire floor. The shared facilities would meet the differential health hazard argument. And outside a few European bed and breakfasts, I’m not aware of any apartment communities still built with shared facilities.

      You’d have a stronger argument with those dorms that are essentially stacks of one and two person apartments. Quad-occupancy and up structures would probably fall somewhere in the middle.

      1. Though Squirreloid has a herd-risk argument below which seems pretty compelling and should probably outweigh any arguments about apartment type.

    2. From a public health standpoint, this is asinine.

      It’s not like they are all going to sit isolated in their parent’s homes — they will still be doing “keg stands” and “hook ups” and all of the other stuff that colleged-aged youth are notorious for, and spreading all kinds of illnesses in the process. And then they will then transmit them to their parents & grandparents.

  6. I was blessed and fortunate to have Professor Caprice Roberts as my contracts professor. I’m delighted to see her here!

  7. My niece may be in a situation when the next term starts where she is required to live in the dorms but all classes are online, as well as any professor’s office hours. How’s that for a twist on the original story?

    1. You raise an interesting liability question — if the institution REQUIRES her to live in the dorms (against her desire not to) and then she gets sick, is there institutional liability?

      On a more practical perspective, how many parents are going to be willing to pay for this? I doubt that a lot of parents of new freshmen will, and as for upperclassmen, it likely will be a case of “throwing good money after bad” — if all you are going to get in the fall is distance learning anyway, why not transfer to a far cheaper distance learning university….

  8. The stupidest part is, keeping students in the dorms is probably better for public health.

    College students tend to be under 30, have very low medical risk when they do contract covid-19, and are mostly in contact with other similarly young people while in college dorms. Sending them home puts them in substantially more contact with older people who are significantly more susceptible to covid-19, potentially including seniors who are at substantial risk

    So any university argument that closing the dorms will be a public health benefit should be treated with a heavy degree of skepticism.

  9. What is needed by colleges and universities is some damned common-sense. Harvard got this right: prorate room & board. Any college or university who would evict students in this circumstance and then keep the money without at least a partial refund (prorated) is worthy of scorn and derision. And legal acyion.

    This is where university presidents can earn their bloated salaries, by exercising command judgment in the face of a novel situation.

    1. Not sure if using “university presidents” and “judgement” in the same sentence is allowed any more.

    2. This was my reaction.

      Prorating the rent seems like the simple, correct, thing to do. Instead we have lawyers scurrying everywhere.

      1. Most colleges simply don’t have the money…

        Remember that it’s projected that upwards of HALF of the colleges in the country will fail in the next decade — there were a lot of places on very, VERY, shaky financial footing, before any of this.

  10. Smith promises to paint Brown’s factory for $100,000, a fire destroys the factory after Smith has incurred costs of $30,000 and received progress payments of $20,000. Should Brown get back any of his $20,000? Should Smith be compensated for any of the costs that he has incurred? …. The American and post-Fibrosa English default rule would return Brown’s $20,000, and, maybe, require that Brown compensate Smith for at least some of his costs incurred in reliance.

    This makes no sense to me. The loss here is the $30,000 Smith has spent, minus any value that the purchased equipment or supplies retain. Absent other considerations, why shouldn’t that loss be split between evenly between the two? If the $30,000 expenditure is now a waste, Smith should refund $5000, so both are out $15,000.

    1. I think that, just as a practical matter, universities should issue refunds. To get an education, students have to live somewhere. Housing is an education expense. It is not practical for students to receive their distance education from the streets.

      Indeed, for those who receive federal financial aid in terms of loans, the aid is specifically authorized only for the cost of education, which includes tuition, books, housing, and food. The proposal here diverts student funds designated for housing to an insurance policy, so that universities still receive the rental value of their property, even though they now do not have the responsibilities that come with tenants. Did Congress authorize the students to use their financial aid money to act as a sort of insurance company for universities?

      1. You raise an interesting point — Federal regulations require the student to refund the financial aid monies if not used for an education, e.g. if the student is kicked out mid-semester. Other than the fact that Betsy DeVos already has enough headaches, why wouldn’t that apply here — students being required to refund (to the Feds) their student aid money and then having to sue the schools for it?

  11. The interesting question here, above and beyond the issue of IF the college even has the money for a refund (and a lot don’t/won’t), to whom do they refund it, and in what amount?

    This gets into the byzantine nature of college financing today, starting with that the *average* discount on tuition is now 50%, with some paying 100%, some paying nothing, and the majority paying somewhere in the middle. And then of those who are paying, most receive some sort of Federal financial assistance.

    The Feds are going to want their money back if it is refunded.

    Hence the schools are in the situation of figuring out refunds when (a) not all students paid in the first place, and then (b) most of the refunds have to be split between the student and the US Department of Education. This will be an accountant’s nightmare…

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