‘I’ve been offered a contract through an
agency. The client wants me, the rate’s
OK, but the agency insists on dealing on its standard terms, and having read
them it seems that those terms themselves will bring the contract within
IR35. Can I go through another
agency?’ The agency say I can’t because
they introduced me, and that they won’t change their standard terms because (1)
they’ve paid £20,000 to have them drawn up, and (2) they can’t be ‘seen to
participate in helping someone to avoid tax’.
I assume from what you tell me that the work itself
is capable of falling outside IR35.
That being so, we can dismiss the point about helping you to avoid
tax: by cooperating with you, they
would be doing no more than helping you to structure your arrangements in such
a way as to pay no more tax than you became legally liable to pay. And there’s nothing whatever wrong with
that. It is no part of an agency’s
function to force arrangements on contractors, where the very structure of
those arrangements would itself cause you to incur more tax. And, frankly, if they’ve just paid £20,000 to have inappropriate
terms drawn up – well, that’s their own poor business decision!
Our starting point therefore is this: we are all
free to do as we choose, and to make such business arrangements as suit our
convenience, provided only (1) those arrangements are not unlawful, and (2)
there is no specific legal reason to prevent us from doing so.
Is there any contractual reason why you should not
provide your services to the Client through a different agency? Is there any contract in force yet; and (if so) would its terms operate so as to
prevent you from going through another agency?
It is clear that there is no contract in force relating to the actual
services yet – this question relates to whether the arrangements under which
you were introduced to the Client are themselves governed by any contract.
What happened was that you let the agency know you
were looking for a particular type of contract; they put you forward to the Client; you were interviewed by the Client; and as a result of that an offer has been made to you by the
agency, at a rate which would have been quite acceptable if the contract terms
themselves were IR35-friendly. There
was nothing in writing which might suggest that the introduction itself was
part of any contractual arrangement.
Whilst this is a sequence of events which could
contain all the necessary elements of a contract (consensus ad idem,
consideration, and intent to be legally bound), the question is whether or not
it in fact did. There was
consideration, in that each party put something into the
arrangement, but were all the major terms clear and certain? And was there mutual intent to create a
legally binding agreement on those terms?
It might be implied as a term that, if you and the
Client found each other acceptable, then you and the agency would make
reasonable efforts in good faith to negotiate mutually acceptable contract
terms. But lawyers call such a term an
‘agreement to agree’, and as such there is real doubt as to whether such a term
is sufficiently certain in meaning to be legally binding. Whilst one might be able to argue that such
a term should be implied into the contract (in order to make the contract
‘work’), having implied it, you are then in the position of having a major term
of the contract which is uncertain in its legal effect; it may well be that this very uncertainty
prevents the formation of a binding contract.
Even if I were wrong on that, your position would be
that you had in fact negotiated in good faith, and failed to
reach agreement – and therefore that you had done all that this contract
required of you. Then, to prevent you
from going through another agent, there would need to be another term
in the contract to that effect.
It’s not suggested that there was any such express term -
would such a term be implied? I cannot
see any basis for this – such a term would not have been necessary to make the
contract ‘work’, and it is not so obvious a term that both parties
would have taken it as read that it would be part of the contract.
We should also consider the law of
confidentiality. This area of the law
doesn’t require a contract or formal agreement. Simply stated, the law is this:
where one person discloses information to another, where (1) that
information is capable of being regarded by the law as confidential, (2) is in
fact regarded by the discloser as confidential, and (3) is received by another
in circumstances where that other is either expressly told that it is
confidential, or where the confidentiality was obvious, then the law will
prevent that other from abusing the confidence, to the disadvantage of the
discloser.
Here, I think the combination of the identity of the
client and the client’s particular needs may be capable of being regarded as
confidential; that information may have
been treated by the agency as confidential.
However, the Client’s need was to fill the position (not
easily done if you keep the need a secret!), and so I think that unless the
agency can show that they expressly told you that the identity of the Client
and its requirements were disclosed in confidence, it would be difficult for
them to show that the confidentiality was obvious.
Overall, it seems to me that, having been willing to
deal with this agency on terms which you yourself found acceptable, and having
failed to agree such terms, there is no reason why you should not now regard
yourself as free to try and arrange acceptable terms through a more enlightened
agency.
26th May 2000
I'd really appreciate your feedback on this FAQ - so mail me and tell me what you think of it, if it's been useful to you, or let me know of any specific problem you have where I may be able to help.
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