‘I’m 6 weeks away from the end of my contract. I’ve had a letter from the agent, saying
that the Client wants to extend for another 6 months, and that if I continue to
work then I will be bound by the extension.
I haven’t yet made my mind up about whether or not to extend, and am
concerned about the IR35.’
This question raises various issues.
The first is whether or not the letter should be treated as meaning what
it says, and how you should respond to it.
The second concerns the general basis on which extensions should be
arranged by the wise contractor, to take account of IR35.
Start here: you already have a
contract, under which you are currently working. The contract itself says that any amendment shall be writing and
signed by both parties. However, it
also goes on to say that you are deemed to have agreed any amendment where they
give you notice of it, and you go on providing services after receiving the
notice.
Let’s consider the general position first. There are various requirements for the formation of a contract -
(1) consensus ad idem – a clear agreement on all the material terms of
the contract; (2) consideration – each
party putting something into the arrangement;
and (3) a mutual intent to be legally bound by the terms.
A variation to the terms of a contract – whether an extension, or some
other kind of variation – is itself a contract, and so has exactly the same
requirements. And it is clear law that
if you try to impose a contract on someone by saying eg ‘If you do not respond
then I will take it as agreed’ then, in the absence of some fact from which one
can infer that the recipient actually agreed to the terms, and of
some act which clearly indicated intent to agree to be bound by it, the attempt
simply will not work – there will be no contract, or (as here) no variation.
The letter may show all the material terms of the change (the new
dates); and (if accepted) there will be
consideration. But where (if you do not
respond to the letter) is the indication of your agreement, or of any intent by
you to be legally bound its terms? I
cannot see that simply continuing to perform the contact indicates anything
other than agreement or intent to do just that – to perform the existing
contract. Certainly not agreement to,
or intent to be legally bound by, changes to it.
Looking at this particular contract, we have an additional requirement
for variations to be in writing and signed by both parties; there is thus a good argument that written
acceptance would be required, before the extension became binding on
you.
Is this position altered by the term saying that you are deemed to have
agreed any amendment where you go on providing services after receiving notice
of it? If this were a valid term then
it would be outrageous. Take it to
extremes – if the law were to interpret it as meaning what it said, then it
would set a framework whereby the agency could reduce the rate to £1 per hour, or make any other changes it pleased. You have made a commitment to provide
certain services for a specified period and on terms which you had agreed. Any of the terms which you had negotiated
could thus be nullified by the agency at a stroke. The agency could simply say that by continuing to work, you were
deemed to accept.
And therein lies the flaw, and the reason why in my opinion, there are
grave doubts about the validity of the term.
What would you do if you did not agree?
If you continue to work, then the agency could claim you had accepted
the change. But if you stop working,
leaving aside the fact that you may not want to do so, then you yourself would
be in breach of contract. Your
continuing to work cannot therefore be any indication of acceptance. So I think it very unlikely that this term
has any validity.
So far as IR35 is concerned, the Revenue suggest that long periods
working for any particular client may be an employment pointer. As with so much of their so-called
‘guidance’, it is simplistic, and I doubt it is a correct statement of the law
– long periods may be no more than sound business management, itself a
non-employment pointer. But we want to
avoid waving red flags at the Revenue where we can, and in my view it would be
much wiser to have a completely fresh contract, rather than an extension of the
existing. And, ideally, the services
should be described differently, where this is justified by the facts – perhaps
you are now working on a different project?
It seems to me that in this case you should respond to the agency
straightaway, in writing, and say that you have not yet made up your mind as to
whether or not to agree an extension, or (if you decide you do want to extend)
then on what terms you would be willing to do so. I think that, given the contract term, you should also expressly
say that your continuing to work from now on may not be interpreted as anything
other than continuing to perform your existing contractual obligations. You might also say that any contractual term
which might seem to suggest that any other interpretation could be placed on
your continuing to provide services under the contract is not accepted as
having any validity.
And if you do decide to accept, then you should insist on a completely
fresh contract; if the services being
provided have changed in any way, then this should be reflected in the new
contract.
7th
July 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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