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Tuesday, April 30, 2024

Approval of Contract Extending Beyond Mayor’s Term a Valid Exercise of Home Rule Authority

In 2021, a home rule municipality (Village) entered into a contract with a vendor (Vendor) for IT services. The Village approved the contract for a 5-year term through a resolution unanimously adopted by the Village Board. The terms of the contract provided that either the Village or the Vendor could terminate the contract, but only after providing written notice to the other party that there had been a breach. For several months, the Village paid the Vendor for services under the contract. At that point, however, the Village Manager informed the Vendor that the contract was not “working out,” and the Village prohibited the Vendor from providing the services for the remainder of the term. The Vendor sued the Village and Village Manager, claiming that the Village had wrongfully terminated the contract without a notice of breach, and that the Village Manager had unlawfully interfered with their performance of the agreed-upon IT services.

In response to the lawsuit, the Village claimed the contract was invalid and void because it violated Section 8-1-7(b) of the Illinois Municipal Code, which provides that municipalities cannot enter into contracts for a term exceeding the term of the mayor or president holding office at the time the contract is signed. Since the contract was signed in April 2021, and the then-Village President’s term was set to end in May 2021, the Village argued the contract was not valid. The trial court agreed with the Village and dismissed the lawsuit.

On appeal, the Vendor argued that because the Village is a home rule municipality, it was not bound by the statute. The Vendor argued that the Village's resolution approving the contract clearly stated it was acting “in the exercise of its home rule powers,” and that evidenced the Village’s intent to enter into the contract for the full 5-year term. In response, the Village argued  it could only exercise its home rule authority by passing an ordinance, not a resolution.  

The Appellate Court ruled in favor of the Vendor, finding the Village had superseded state statute by adopting the resolution and expressly invoking its home rule authority in the text of the resolution. Proven Business Systems LLC v. Village of Oak Lawn. The Court determined that a home rule municipality has the authority to enter into contracts for an extended term so long as (1) the contract is approved by a majority vote of the corporate authorities and (2) the approval shows an intent to supersede the requirements of the statute. Because both of these circumstances were satisfied by the resolution and contract in this case, the Court found the Vendor's lawsuit should not have been dismissed by the trial court. 

Post Authored by Erin Monforti, Ancel Glink


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