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favor of the Vendor, finding the Village had superseded state statute by adopting the resolution and expressly invoking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