applicant for employment. Such a federal immunity claim applies only in those limited circumstances in which a federal district court could obtain jurisdiction over a breach of contract claim.
Regarding contract liability, there is little distinction to be made among trustees, administrators, employees, and other agents of the institution. Whether the actor is a member of the board of trustees or its equivalent—the president, the director of athletics, the dean of arts and sciences, or some other functionary—the critical question is whether the action was authorized by the institution. Allegedly aggrieved parties can be vendors and independent contractors, campus guests, current or former employees, or current or former students. For example, Kalick v. U.S., 604 Fed. Appx. 108 (3d Circ. 2015), involved a dispute between a student and a university over tuition payment. The university withheld the student's transcript pending payment of his outstanding tuition balance. The student alleged breach of contract, and ultimately learned that the federal courts lacked subject matter jurisdiction over such a dispute.
The issue of who has authorization to bind the institution to contractual terms can become very complex. In Brown v. Wichita State University, 540 P.2d 66 (Kan. 1975),5 the court discussed the issue at length:
To determine whether the record establishes an agency by agreement, it must be examined to ascertain if the party sought to be charged as principal had delegated authority to the alleged agent by words which expressly authorize the agent to do the delegated act. If there is evidence of that character, the authority of the agent is express. If no express authorization is found, then the evidence must be considered to determine whether the alleged agent possesses implied powers. The test utilized by this court to determine if the alleged agent possesses implied powers is whether, from the facts and circumstances of the particular case, it appears there was an implied intention to create an agency, in which event the relation may be held to exist, notwithstanding either a denial by the alleged principal, or whether the parties understood it to be an agency.
“On the question of implied agency, it is the manifestation of the alleged principal and agent as between themselves that is decisive, and not the appearance to a third party or what the third party should have known. An agency will not be inferred because a third person assumed that it existed, or because the alleged agent assumed to act as such, or because the conditions and circumstances were such as to make such an agency seem natural and probable and to the advantage of the supposed principal, or from facts which show that the alleged agent was a mere instrumentality” [quoting Corpus Juris Secundum, a leading legal encyclopedia]… The doctrine of apparent or ostensible authority is predicated upon the theory of estoppel. An ostensible or apparent agent is one whom the principal has intentionally or by want of ordinary care induced and permitted third persons to believe to be his agent even though no authority, either express or implied, has been conferred upon him.
Ratification is the adoption or confirmation by a principal of an act performed on his behalf by an agent, which act was performed without authority. The doctrine of ratification is based upon the assumption there has been no prior authority, and ratification by the principal of the agent's unauthorized act is equivalent to an original grant of authority. Upon acquiring knowledge of his agent's unauthorized act, the principal should promptly repudiate the act; otherwise it will be presumed he has ratified and affirmed the act [540 P.2d at 74–75].
The Brown case arose after the crash of a plane carrying the Wichita State football team. The survivors and personal representatives of the deceased passengers sued Wichita State University (WSU) and the Physical Education Corporation (PEC) at the school for breaching their Aviation Service Agreement by failing to provide passenger liability insurance for the football team and other passengers. The plaintiffs claimed that they were third-party beneficiaries of the service agreement entered into by WSU, the PEC, and the aviation company. The service agreement was signed by the WSU director of athletics and by an agent of the aviation company. The university asserted that it did not have the authority to enter the agreement without the board of regents' approval, which it did not have; that it did not grant the director of athletics the authority to enter the agreement on its behalf; that the director only had authority to act as the agent of the PEC; that WSU could not ratify the agreement because it lacked authority to enter it initially; and that, as a state agency, it could not be estopped from denying the validity of the agreement.
The court held that the PEC was the agent of the university and that the director of athletics, “as an officer of the corporate agent [PEC], had the implied power and authority to bind the principal—Wichita State University.” The court further held that failure to obtain the board of regents' approval did not invalidate the contract because the legislature had “delegated to the board of regents the authority to control, operate, manage, and supervise the universities and colleges of this state” (540 P.2d at 76),6 and the board had created no policy, rule, or regulation that limited the authority of its agents to enter into contracts. The fact that the agreement had been partly performed was particularly persuasive to the court.
For a later example of a case in which a court ruled that the individual signing a contract on behalf of the Arizona Board of Regents lacked the authority to modify a contract, making the contract modification unenforceable, see Kaman Aerospace Corp. v. Arizona Board of Regents, 171 P.3d 599 (Ariz. Ct. App. August 23, 2007).
In a case involving both apparent authority and ratification doctrines, the Supreme Court of Massachusetts ruled that Boston University had to pay a technical training company more than $5.7 million for its “willful and knowing” breach of contract (Linkage Corporation v. Trustees of Boston University, 679 N.E.2d 191 (Mass. 1997), cert. denied, 522 U.S. 1015 (1997)). One important issue in the case was whether an earlier contract between Boston University and Linkage for the provision of educational services by Linkage had been renewed; Linkage asserted that it had, but the university stated that the contract had not been renewed but had been lawfully terminated. A jury had found that the university's vice president for external programs had apparent authority to enter a renewal contract with Linkage and also found that the university had ratified that agreement.
With respect to the apparent authority issue, the court noted that the vice president had “virtual autonomy” in supervising the relationship between Linkage and the university. He had been the university's representative in the negotiation of the earlier contract and was named in the contractual documents as the university's primary representative for all legal notices. Boston University argued that the vice president lacked authority to enter the agreement because, at the same time that negotiations for the contract renewal were taking place, the university had issued a directive that required all payments greater than $5,000 to be authorized by the senior vice president. The court, however, ruled that, because the vice president for external programs had direct access to the president and because the contractual relationship predated the directive, it was reasonable for Linkage's president to conclude that the directive would not be enforced with respect to its contract with the university.
With respect to the ratification issue, the court agreed with the jury that the conduct of university officials subsequent to the execution of the renewal contract supported the ratification argument. The vice president had asked his superiors, in writing, if additional review was necessary after he executed the renewal contract. Neither the senior vice president nor the president advised Linkage's president or their own vice president that they did not approve of the renewal contract. Characterizing the conduct of university officials as “informed acquiescence,” the court endorsed the jury's finding that the university had ratified the agreement. Although the behavior of university officials was sufficient to establish ratification, the court added that, because the university benefited financially from the execution of the renewal contract, this benefit was additional evidence of its ratification of the agreement.
Colleges and universities are increasingly being sued for breach of contract
