‘After an apparently successful interview I signed up with an agency
for a contract. Two days before it was
due to start, the agency told me they had been told by the client that the
project was cancelled. First they said
they’d pay me in lieu of notice…then they said they wouldn’t…and now they say
the client wants me to work for the next three weeks doing something else for
them.’
Clearly, a contract had been formed here. You and the agency had agreed terms, and had both signed. So you were both bound by its terms.
The contract contained provision for termination by either party on
four weeks notice, and I shall take this opportunity to digress for a moment to
deal with an issue related to that, which I had been intending to cover in one
of these articles:
The Revenue seem to suggest,
both in their guidance material, and in some of the IR35 opinions I’ve
seen from them, that a right to terminate a contract on notice is an
employment-pointer. Now, I am not aware of any case law to support such a view, and
if there is no such case law then I personally fail to see the Revenue’s point,
because as a clear matter of fact, in my experience, a contract for services
(other than one with a clearly defined deliverable) is just as likely to
contain provision for termination on notice as a contract of employment.
And my own view is that, except (possibly) for where a
contract is for a clearly-defined and short task, there are nearly always sound
commercial reasons why there should be provision in contracts for services for
either party to terminate on notice, generally of one month or
thereabouts.
Apart from the need to retain flexibility against the risk
of the unknown, such a right will also generally put a ceiling on the damages
for which a party may become liable, in the event of breach resulting in
termination of the contract – where there is such a breach, a party’s liability
for damages will generally be limited to damages up to the point where he could
lawfully have terminated.
So that means that where there’s a notice period, the limit
will generally be damages for that notice period – but where there isn’t, such
damages may be for the whole of the contract period. And that could be a lot higher – and (in my book) there remain
sound commercial reasons, from both parties’ points of view, for including
provision for premature termination on notice (ie in the absence of fault). It does of course work both ways – but I see
that as not unreasonable.
So the position here is that the agency is in breach. It is therefore liable to you for
damages; the starting point for
assessing those damages will be the amount that would place you in the position
in which you would have been, had the contract not been broken – the agency
could have lawfully terminated on 4 weeks notice, without fault on your part,
and so that would appear to put a ceiling on your damages claim of 4 weeks, at
the contract rate.
When you signed the contract, you told others with whom you
had been negotiating that you were no longer available, and it will clearly
take some time for you to re-develop other leads, and bring one of them to the
point of concluding another contract.
The real question here relates to your duty to mitigate
your losses: damages (so the theory
goes) are intended to put you, the innocent party, in the position in which you
would have been, had the breach not occurred – damages are not intended to be a
reward extending beyond that. Damages
are intended to replace the lost contract income for a period – but you have to
be seen to use all reasonable efforts to replace the contract income from other
sources, as soon as reasonably practicable.
Here, you have the client offering to do exactly that – to
give you other work for 3 weeks. And if
you do not treat and consider this offer seriously, then the agency may be able
to argue that whilst they may be in breach, you have failed to mitigate your
losses, and so they should not be liable to pay you for the full four weeks in
lieu.
As a first step, you need to get clear exactly what is
being offered, and on what terms. You
certainly need to be satisfied that the work is within, and makes use of, your
skill-set – as an SAP consultant, you’d be entitled to politely decline the
opportunity to spend 3 weeks doing the office filing. But assuming ‘yes’ to these points, then I would say that
declining could well prejudice any damages claim. I would however try and get their agreement to your taking time
out (unpaid of course) for interviews where necessary - and to the principle of
your leaving before the end of the three weeks, should you find something
longer-term which starts sooner.
4th
August 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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