If an Arkansas county interlocal agreement leaves out the six-month termination clause, can a party still withdraw on six months' notice?

Plain-English summary

State Senator Bryan King posed seven detailed questions about county interlocal agreements under A.C.A. § 14-14-910. The factual backdrop was a set of agreements between Carroll County and the cities of Green Forest, Eureka Springs, and Berryville about housing city prisoners in the county jail. The agreements characterized themselves as "perpetual" and required mutual consent to terminate; Senator King wanted to know whether they were valid, whether statutory termination rights could be read in, and how a 2000 ballot-title sales tax for the jail factored in.

The AG worked through each question:

• Authorize vs. approve. The statute requires that interlocal agreements be "authorized and approved" by the governing body of each party. Senator King read those as two separate steps. The AG doubted a court would treat them that way. A single formal ordinance by the quorum court sanctioning the county judge's execution of the agreement would likely satisfy A.C.A. § 14-14-910(c)(1).
• Reading statutory law into silent contracts. Under the long line of cases beginning with Mahurin v. Oaklawn Jockey Club and continuing through Woodend v. Southland Racing Corp., the law in effect when a contract is made forms part of it as if expressly stated. So the six-month withdrawal-on-notice provision in A.C.A. § 14-14-910(c)(3)(E) will be read into an interlocal agreement that does not address termination.
• Contradictory contract terms. Courts do not rewrite contracts. They do not strike an unlawful term and substitute a different lawful term. Owen v. Merts, St. Paul Fire & Marine Ins. Co. v. Kell, and Rector-Phillips-Morse v. Vroman all confirm that point. If the parties' contract expressly bars unilateral withdrawal, a court will at least decline to enforce that unlawful provision; depending on the circumstances, it might conclude no contract exists at all because the parties never reached a meeting of the minds on a material term.
• "Perpetual" does not mean forever. A.C.A. § 14-14-910(b)(2) gives "permanent or perpetual relationship" an eccentric definition: any agreement running more than one year, or any agreement with no fixed duration where intent is to be permanent. So a "perpetual" agreement under this statute is one with the statutory six-month opt-out baked in.
• Service contracts vs. interlocal agreements. A.C.A. § 25-20-108(a) authorizes informal service contracts between public agencies. But the AG warned that this provision does not let parties contract around the unilateral-withdrawal requirement of A.C.A. § 14-14-910 when the substantive arrangement is a county interlocal services agreement. The procedural latitude does not erase the substantive opt-out right.
• Local ballot-title questions. The AG declined to interpret the 2000 sales-tax ballot title (which authorized funds "to construct and equip a jail facility and sheriff's department and to ... operate the jail facility and Central Dispatch") because interpreting local ballot titles is a job for local counsel and the courts, not the AG.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

A.C.A. § 14-14-910 is one of two parallel tracks for inter-jurisdictional cooperation in Arkansas. The other is the Interlocal Cooperation Act, A.C.A. § 25-20-101 et seq., which authorizes "joint undertakings" among public agencies. Section 14-14-910 specifically governs "county interlocal agreements," meaning service contracts entered by the county court that establish a "permanent or perpetual relationship" obligating county financial resources.

Key statutory features:

• Authorization clause (A.C.A. § 14-14-910(c)(1)): the agreement must be authorized and approved by the governing body of each party.
• Contents clause (A.C.A. § 14-14-910(c)(3)(E)): the agreement must specify the permissible methods of termination, "[t]he methods for termination shall include a requirement of six (6) months written notification of the intent to withdraw by the governing body of the public agency wishing to withdraw[.]" The AG read the "shall include" language as mandatory; sponsors can pick their preferred mechanics, but the six-month opt-out is non-waivable.
• Definitional eccentricity (A.C.A. § 14-14-910(b)(2)): "permanent or perpetual relationship" means an agreement of more than one year, or one with no fixed duration intended to be permanent. So a "perpetual" interlocal agreement under this statute is not really perpetual: it is a long-term agreement subject to the six-month withdrawal right.

The Arkansas Supreme Court has been firm about the no-rewriting-contracts rule. Owen v. Merts (1966): "courts will not rewrite contracts for the parties." St. Paul Fire & Marine (1959): "The Courts do not rewrite the contract into which the parties have entered. The law does not permit the Courts to add to, subtract from, or substitute for the language employed in the policy." Rector-Phillips-Morse v. Vroman (1973): the court affirmed a trial court's refusal to strike an unlawful contractual non-compete clause and substitute a lawful provision.

So the analysis splits cleanly:

• Silent contract: statute fills the gap. Withdrawal right available.
• Contradicting contract: statute does not save the unlawful term. Court will not enforce the bad term, and may treat the whole contract as void for failure to agree on material terms.

Common questions

What if a county and city agreed to a "mutual consent only" termination clause?

That clause directly conflicts with A.C.A. § 14-14-910(c)(3)(E)'s mandatory six-month withdrawal right. The AG's view is that a court will at least decline to enforce the mutual-consent term. It will not substitute the six-month clause. The county or city wishing to exit might therefore find itself with no contractually enforced termination mechanism at all and would need to seek a judicial declaration that no binding contract existed, or argue the contract was void for failure to satisfy a substantive statutory prerequisite.

Can parties bypass interlocal-agreement formalities with A.C.A. § 25-20-104(h)?

A.C.A. § 25-20-104(h) lets cities, towns, counties, and other units cooperate "on an informal basis without complying with the detailed procedure" set out in the Interlocal Cooperation Act. The AG read that as procedural license, not substantive license. A county and city cannot use § 25-20-104(h) to circumvent the substantive opt-out right in § 14-14-910.

What about a one-time service contract that isn't a "permanent or perpetual relationship"?

A.C.A. § 25-20-108(a) authorizes one or more public agencies to contract with each other for any governmental service. The AG noted these contracts must specify "the purpose, powers, rights, objectives, and responsibilities of the contracting parties." For a true short-term arrangement that does not establish a "permanent or perpetual relationship" within the meaning of § 14-14-910(b), the six-month opt-out probably is not statutorily mandatory. But if the practical effect is a long-term services relationship dressed up as a one-off, the AG suggested a court would still apply § 14-14-910's protections.

Who signs an interlocal agreement on behalf of the county?

The county judge, per A.C.A. § 14-14-1102(b)(2)(C). The quorum court must authorize the agreement, but the actual contracting authority is in the county judge's hands. The sheriff does not have authority to contract on behalf of the county (except for employees of the sheriff's department itself, per § 14-14-1102(b)(5)(B)(ii)(6)).

Why did the AG decline to interpret the 2000 ballot title?

Interpreting local ballot titles is not an AG function. Local counsel and ultimately the courts handle that. The AG cited Op. Att'y Gen. 96-057 and 93-093 for that proposition. The general rule (per Op. Att'y Gen. 92-347) is that ballot titles are construed by their ordinary meaning. So if the 2000 ballot title says revenues are "to be used to construct and equip a jail facility and sheriff's department and to ... operate the jail facility and a central dispatch office," then determining whether warrant-processing services fall within "operate the jail facility" is a question for a court acquainted with all the relevant facts.

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2014-102
October 13, 2014

The Honorable Bryan King
State Senator
871 CR 814

STATE OF ARKANSAS
THE ATTORNEY GENERAL
Dustin McDANIEL

Green Forest, Arkansas 72638

Dear Senator King:

I am writing in response to your request for my opinion on various questions regarding the possibility that certain provisions must be contained in or read into county interlocal agreements entered pursuant to A.C.A. § 14-14-910 (Repl. 1998). You have further included a question seeking clarification of various agreements between Carroll County and various cities relating to the housing of city prisoners in the Carroll County jail. Your specific questions are as follows:

1. Pursuant to provisions of A.C.A. § 14-14-910, is an interlocal agreement valid and enforceable if it was authorized but not approved by the quorum court?

2. Is an interlocal agreement valid and enforceable (a) if it was not authorized by the various city councils of the governments that were party to the contract and/or (b) if it was not approved by the various city councils of the governments that were party to the contract?

3. Pursuant to A.C.A. § 14-14-910, do methods of termination become a part of the interlocal agreement despite the omission by the parties?

4. Does the termination provision of code become a part of the interlocal agreement despite the reference to the duration of the agreement as perpetual?

5. Doesn't this provision of code become a part of the interlocal agreement despite the reference in the agreement that it may be terminated only by written consent of both parties?

6. According to the cited provision of law, may a party to these interlocal agreements terminate by providing written notice as per the law despite the omission of that provision in the interlocal agreement?

7. Do agreements for the supervision, care and housing of city prisoners in the Carroll County Jail or the 2000 ballot title approving a 1/2 penny local sales tax include law enforcement services such as processing warrants, updating warrants, running warrants through ACIC or payment of ACIC terminal costs for city inquiries?

RESPONSE

With respect to your first two questions, I question your apparent assumption that A.C.A. § 14-14-910 requires that a county interlocal agreement be both "authorized" and "approved" by the governing body of any party to the agreement. Although it is beyond dispute that the governing body of a participating party, including any city, must sanction an interlocal agreement, I do not believe it must discretely "authorize" and then "approve" the particular agreement. I have addressed your third and fifth questions together, given that they deal respectively with agreements that fail to incorporate and that expressly contradict a particular subsection of the statute. With respect to your third question, in my opinion, any applicable provision of law will be read into a contract, including a county interlocal agreement, that is silent on the subject matter addressed in the statute. The provision of A.C.A. § 14-14-910 requiring that a party to a county interlocal agreement be allowed unilaterally to withdraw will thus be read into a contract that fails to address the issue of terminating the contract. However, if the contract contains a provision that directly conflicts with an applicable provision of law, as your fifth question contemplates, I do not believe a court will substitute the statutory provision for the contrary contractual provision. With respect to your fourth question, I assume the term "perpetual" as used in the agreements at issue tracks the definition of that term in the Code, namely, running one year or longer. An agreement's characterization of itself as "perpetual," then, does not necessarily conflict with its inclusion of a "termination provision" of the sort required under the Code. As indicated in my response to your third and fifth questions, I believe the Code's "termination provision" will be read into the agreement only if the agreement is silent on this issue, not if the agreement contains a provision directly at odds with the Code. In the event of a direct conflict between the Code provision and an express term of the agreement, a court would at least decline to enforce the unlawful contractual provision and might, depending on the circumstances, conclude that no contract exists because the parties failed to reach the requisite meeting of the minds on all material terms. With respect to your sixth question, I address the circumstances under which a statutory termination provision might be read into an agreement in my responses to your third and fifth questions. Finally, I must respectfully decline to answer your seventh question, which raises issues of fact properly addressed in the first instance by the county attorney and, in the event of a dispute, by a court.

Question 1: Pursuant to provisions of A.C.A. § 14-14-910, is an interlocal agreement valid and enforceable if it was authorized but not approved by the quorum court?

The Code section you cite provides generally as follows:

The county court of each county may contract, cooperate, or join with any one (1) or more other governments or public agencies, including any other county, or with any political subdivisions of the state or any other states, or their political subdivisions, or with the United States to perform any administrative service, activity, or undertaking which any contracting party is authorized by law to perform.

This statute further provides that any such agreement shall "[b]e authorized and approved by the governing body of each party to the agreement."

You assume in your question that the terms "authorized" and "approved" in this statute clearly refer to separate steps, each of which must be discretely taken in order for the agreement to be effective. Although I have found no authority that directly addresses this question, I doubt that a reviewing court would construe the statutory language as dictating any such formal, two-part adoption process. Rather, I suspect that a court would deem the statutory requirement met, thereby satisfying at least this requirement of a "valid and enforceable" interlocal agreement, so long as the quorum court has by formal ordinance sanctioned the county judge's action in executing the agreement on behalf of the county.

Question 2: Is an interlocal agreement valid and enforceable (a) if it was not authorized by the various city councils of the governments that were party to the contract and/or (b) if it was not approved by the various city councils of the governments that were party to the contract?

This question, like the former, raises the possibility, acknowledged as being no more than that by your ambiguous use of the term "and/or," that a local governing body's required agreement to participate in an interlocal agreement involves two clearly distinct steps of "authorization" and "approval." Again, I question that a court would interpret the statute as requiring such redundant formal sanctions of an interlocal agreement. Rather, I believe a court would read subsection (c)(1) as requiring only that any city council formally endorse the city's participation in an interlocal agreement. Absent such a formal endorsement, in my opinion, the validity of the interlocal agreement would be subject to challenge. The resolution of any such challenge would turn upon the court's consideration of all the attendant circumstances.

Question 3: Pursuant to A.C.A. § 14-14-910, do methods of termination become a part of the interlocal agreement despite the omission by the parties?

Question 5: Doesn't this provision of code become a part of the interlocal agreement despite the reference in the agreement that it may be terminated only by written consent of both parties?

I will address these two questions together because they both involve the application of a particular statutory subsection. With respect to your third question, in my opinion, if the parties have omitted all reference to the "termination" of a contract, the statutory provisions addressing this issue will indeed become part of the contract. The answer to your fifth question as phrased, however, is "no." I have reached these conclusions because, as discussed below, while a court will normally read into a contract a pertinent provision of law that the contract simply fails to address (a judicial course based on the assumption that the parties understood the effect of applicable law in reaching their agreement), it will not strike a provision and substitute therefor a statutory provision that flatly contradicts a material term of the parties' express agreement.

At issue in both of your questions is the application of the following provision of A.C.A. § 14-14-910:

(c) Contents. An interlocal agreement shall:

---

(3) Specify the following:

---

(E) The permissible methods to be employed in accomplishing the partial or complete termination of an agreement and for disposing of property upon partial or complete termination. The methods for termination shall include a requirement of six (6) months written notification of the intent to withdraw by the governing body of the public agency wishing to withdraw[.]

You assume in the first of these questions, correctly, in my estimation, that subsection (c)(3)(E) requires an interlocal agreement to contain provisions for its "partial or complete termination," including "a requirement of six (6) months written notification of the intent to withdraw" by the governing body of the party wishing to withdraw. You inquire whether this provision will be read into the interlocal agreement even if the parties have failed to include it.

In my opinion, the answer to this question is "yes" so long as the contract is itself silent on the issue of termination. It is well established that "the law in effect at the time a contract is made forms a part of the contract as if it had been expressed in the contract." Assuming a purported county interlocal agreement is silent on the issue, then, a reviewing court will in all likelihood read the six-months' termination provision into the contract.

The question becomes more complicated, however, if a purported interlocal agreement contradicts the terminability requirement set forth in the statute, as it does in the agreements attached to your request. Each of these agreements flatly denies individual parties the right unilaterally to withdraw from the contract. The question arises, then, whether in such a case a reviewing court would strike the clause negotiated by the parties and substitute therefor the terminability provision set forth above.

In my opinion, a court would be highly unlikely to strike a term of a contract and substitute therefor another term. As a general rule, "courts will not rewrite contracts for the parties." As the Arkansas Supreme Court has explained:

The Courts do not rewrite the contract into which the parties have entered. The law does not permit the Courts to add to, subtract from, or substitute for the language employed in the policy. It is the duty of the Courts to construe the language used by the parties and such construction is performed by considering the sense and meaning of the terms which the parties have used as they are taken and understood in their plain ordinary and popular sense.

This principle is in no way inconsistent with the proposition, discussed above, that existing law will be read into a contract. Reading existing law into a contract that fails expressly to state that law differs crucially from striking an unlawful contractual provision and substituting therefor what would otherwise be a binding law. The law demands the former; it forbids the latter. This principle is perfectly logical, given that a court's determination that the parties have entered into an unlawful agreement should not support the court's imposing upon the parties a lawful "agreement" to which neither party has assented.

Finally, although you have not directly raised the issue, I feel obliged to address in passing the question of whether the termination provision set forth in the agreements, even though it conflicts with the requirement of a county interlocal agreement under A.C.A. § 14-14-901, might be deemed a valid term of another type of contract. I note in this regard that the Code contains the following provision expressly authorizing counties and cities to enter into service contracts that do not fall under the rubric "interlocal agreements":

Any one (1) or more public agencies may contract with any one (1) or more other public agencies to perform any governmental service, activity, or undertaking which each of the public agencies entering into the contract is authorized by law to perform alone, provided that the contract shall be authorized by the governing body of each party to the contract. The contract shall set forth fully the purpose, powers, rights, objectives, and responsibilities of the contracting parties.

One might inquire whether the final sentence of this statute authorizes the parties to an interlocal services contract to agree that their contract will be terminable only by mutual consent. In my opinion, a reviewing court would likely answer this question in the negative. The statute just quoted distinguishes straightforward services contracts from contracts covered by the Interlocal Cooperation Act, which authorizes joint undertakings between or among public agencies authorized independently to undertake the proposed joint activity. Significantly, a service contract of the sort described in the statute just quoted does not contemplate a joint enterprise of the sort covered by the Interlocal Cooperation Act. Rather, it covers precisely the type of service contract covered in A.C.A. § 14-14-901, which expressly requires that a qualified right of unilateral termination upon adequate notice be included in the agreement. At least with respect to a multi-jurisdictional services contract involving a county, then, A.C.A. § 14-14-901 appears to restrict the ability of the parties to negotiate a provision requiring mutual consent to terminate the contract.

Question 4: Doesn't the termination provision of code become a part of the interlocal agreement despite the reference to the duration of the agreement as perpetual?

The focus of this question appears to be on whether the self-characterization as "perpetual" of each agreement attached to your request conflicts with the provisions of the Code requiring the inclusion of a termination provision. In my opinion, your concern on this score is unfounded, given that the term "perpetual" as used in the agreements at issue appear to track the Code's own use of the term "perpetual" as one of art that is not coextensive with "forever."

Significantly, the Code contains both a requirement that every "county interlocal agreement" contain a specified opt-out clause and a definitional requirement that any such agreement establish "a permanent or perpetual relationship." Any apparent conflict between this opt-out requirement and the definitional description of a "county interlocal agreement" as "perpetual" is resolved by the following eccentric definition of the term "permanent or perpetual relationship":

"Permanent or perpetual relationship" means for purposes of this section any agreement exhibiting an effective duration greater than one (1) year, twelve (12) calendar months, or an agreement exhibiting no fixed duration but where the apparent intent of the agreement is to establish a permanent or perpetual relationship.

Needless to say, a contract running indefinitely or for any fixed term exceeding 12 months may without contradiction contain a qualifier allowing a unilateral opt-out of the sort discussed above. Consequently, a reviewing court would probably read the statutory opt-out provision into a contract that failed to mention withdrawal, whereas it would likely decline to modify (and, possibly, to enforce) an unlawful contract that expressly purported to deny a party unilaterally to withdraw upon giving due notice.

Question 6: According to the cited provision of law, may a party to these interlocal agreements terminate by providing written notice as per the law despite the omission of that provision in the interlocal agreement?

In my opinion, as noted in my response to your fifth question, a court would probably not read into a contract a provision of statutory law that conflicts directly with an express term of an agreement negotiated by the parties thereto. Only a court acquainted with all the attendant circumstances would be situated to determine (a) whether, given the illegality of the conflicting provision, the parties to "these interlocal agreements" had in fact entered into a binding agreement; and (b) whether their agreement reached by the parties should be enforced in whole or in part.

Question 7: Do agreements for the supervision, care and housing of city prisoners in the Carroll County Jail or the 2000 ballot title approving a 1/2 penny local sales tax include law enforcement services such as processing warrants, updating warrants, running warrants through ACIC or payment of ACIC terminal costs for city inquiries?

I must respectfully decline to answer this question, which seeks my opinion on factual matters that are beyond the scope of my authority to address in a formal opinion. I have discussed in Opinion 2014-081 my lack of authority to construe contracts and local ordinances. Similar difficulties attend any request seeking my interpretation of local ballot titles.

As a general proposition, however, a ballot title will be construed as it reads, giving words their ordinary and usually accepted meaning in common usage. I note in this regard that the ballot title specifies that tax revenues are:

... to be used to construct and equip a jail facility and sheriff's department and to be used to operate the jail facility and a central dispatch office. Any excess revenues generated ... shall be used for future jail expansion, capital improvements or county roads.

Determining whether the "law enforcement services" described in your request fall within these authorized categories is a matter properly undertaken by a court acquainted with all the attendant circumstances.

Assistant Attorney General Jack Druff prepared the foregoing opinion, which I hereby approve.

Sincerely,

Attorney General

DM/JHD:cyh