‘I worked for nearly a year under a
contract with an agency. Then out of
the blue one day the Client’s representative I reported to told me that the MD
was not happy with the way things were going, and that I was no longer
required. I was surprised, and sought
an immediate interview with the MD. He
told me that they were perfectly happy, but that they had always planned to
replace me with a permie, and that they had now found someone suitable. I got nothing in writing from the
agency; they simply told me that their
contract with the Client allowed the Client to remove me at will.’
That part of the story happened a year
ago; when this Contractor put this
problem in front of me, he had still got nothing in writing from
the agency – whilst he had written to them a couple of times, the only results
were phone calls (always initiated by him) when, if he got lucky enough to talk
to someone, he was repeatedly fobbed off with ‘we’re still trying to sort it
out with the Client’.
The first thing to do was to look at the
contract; it consisted of a ‘framework’
contract (which laid down the ground rules, but did not require any actual
work), coupled with a succession of Purchase Orders (‘POs’), each for two or
three month’s work, paid at a daily rate.
[This is a type of contractual structure not particularly usual in this
industry, although we may see it become more popular, as it can in certain
circumstances have IR35-related advantages.]
There was no provision in a PO for early termination of the work under
that PO, but the contract itself could be terminated by either party, either on
one month’s written notice, or ‘for cause’ (ie for material breach of contract
by the other). The contract was ended
when there was 6 weeks of work still to go under the current PO.
So it seemed that the early termination
without notice and without cause amounted to a breach on the part of the agency
– they had made a contractual commitment that work would be available to the
extent and for the period covered by the PO, and that work had prematurely
ceased to be available. This was a
breach of contract, resulting in loss to the Contractor.
So what was that loss? On the face of it, it would have been the 30
days unworked under the PO. However,
there were two elements that reduced that loss. First, as a general principle, where a contract ends early
because of one party’s breach, but where that party could have lawfully taken
other action to end the contract early (in this case, by giving one month’s
notice under the framework contract), then the losses the innocent party can
recover will be limited to the amount of loss there would have been if the
other party had terminated the contract lawfully – so in this case the
recoverable losses were limited to a one month notice period. And secondly, there is (as always) the duty
of the innocent party to mitigate his loss, by using reasonable efforts to
obtain other work as soon as possible after it becomes clear that the contract
has been ended by breach. In this case,
the contractor had missed out on 18 working days, before being able to start
another contract at a higher rate. So
the recoverable losses were limited to 18 days at the contractual rate.
So the next thing to do was to spell out
this position in a letter to the agency – which we did, even though we
(rightly) anticipated that they would ignore it. We had in mind that if we did not get a satisfactory response,
legal action would then be commenced.
Why write first if you think it will be
ignored, you may ask? Three reasons: first, there is always the possibility that
a fresh and comprehensive setting out of the position in writing will, if not
cause reason to prevail, then at least cause the other party to commit their
own position to writing, so that you no longer have to speculate on exactly
what case you will have to deal with;
secondly, because if you don’t write and instead just start legal
action, you give the other party the opportunity to say ‘well if you’d written
and explained it in that way then of course we would have dealt with it’ – not
writing such a letter risks getting you off on the wrong foot; and thirdly, if you do have to sue, then for
the Judge to see such a letter (especially if it is unanswered) is a powerful
device for getting the Judge on your side from the first moment he opens the
file. In short, whatever happens next,
sending such a letter will help you.
A second letter was then sent, simply
saying that as they had ignored the first letter, we were now commencing legal
action. And to this we got a hastily
dratted reply from solicitors, claiming (without giving details) that the
contract had been terminated early as a result of poor quality work. They had walked into our trap, and we were
able to reply and tell them about our discussion with the Client’s MD. And that, I’m happy to say, resulted in an
immediate offer of settlement for an amount not far short of the total claimed.
The moral of the tale? First, if an unjustified suggestion is made
about the quality of your work, and which you think is simply an excuse to
manipulate you out of your position for other reasons, then challenge it,
insist on details, and take it higher if you can – the results can be
invaluable in strengthening your case.
And be aware that often people faced with a problem they don’t want to
address will play the ostrich by ignoring it and hoping it will go away – in
such situations, persistence pays!
31st March 2000
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