‘After 3 months working on a 6 month
contract, the Project Manager said the project was being put on ice as a result
of lack of budget. The agency wrote the
next day simply saying that the contract was terminated straightaway. I sent an invoice for the 4 week notice
period, which the agency refuses to pay – and now the agency claims they
terminated the contract under a provision giving them the right to do so
without notice if the Client proves to their satisfaction that my services are
unsatisfactory, and because I haven’t produced signed timesheets for the notice
period.’
It’s clear that the contract was for the
full 6 month period, subject only to (1) an express right of termination by
either you or the agency on 28 days notice, and (2) a term giving them the
right to terminate ‘if the Client proves to the agency’s satisfaction that the
contractor’s services are unsatisfactory’.
When the agency wrote and told you that
the contract was being terminated immediately, they did not refer to either of
these terms, and neither did they make any claim that you were in any way at
fault. They simply made clear to you
that – so far as they were concerned – the contract was at an end, and that
they no longer intended to honour their part of it. It was only sometime afterwards – and after receiving your
invoice for payment in lieu of notice - that they claimed to have been entitled
to terminate under the ‘unsatisfactory services’ provision.
The next question is, does the fact that
the initial letter made no reference to the ‘unsatisfactory services’ claim
prevent them from claiming that termination was in fact under that
provision? We should sidestep this –
maybe it does, and maybe it doesn’t - but even if it does (and therefore if
this alone proves that the agency was in breach of contract because of the way
in which they terminated, simply because they didn’t give the reason at the
time) it wouldn’t help you – if they could have terminated at the
time under the ‘unsatisfactory services’ bit, then your damages will be limited
to what they would have had to pay if they had in fact done so. Pyrrhic victory – we prove breach of
contract, but they can still raise the same issues to argue the question of
damages.
The first major factor pointing in your
favour is credibility; the fact that
they did not make any claim of ‘unsatisfactory services’ until well after
termination, until after receiving your own invoice, certainly suggests the
‘unsatisfactory services’ claim to be no more than a later fiction, only dreamt
up for the first time when they realize you are actually claiming money from
them. You may ask yourself, if they
honestly thought they had grounds to terminate for your own breach, why on
earth did they not say so at the time?
Does not the fact that they did not do so suggest that they did not in
fact think they had such grounds at the time?
This is the simple and compelling logic of human behaviour, and these
are certainly questions that a judge hearing the case will expect credible
answers to.
The second major factor is the way the
term itself is worded – ‘IF the Client proves to the Agents satisfaction that
the Contractor’s services are unsatisfactory, THEN the agency may terminate
without notice.’ A conditional statement. The condition must be satisfied before the
right to terminate can arise. If the
condition is not satisfied, then no right to terminate can arise. Unless the agency can show that the
condition was satisfied BEFORE the termination letter, then they COULD NOT have
terminated lawfully. So the agency
would have to prove not only that your services in fact were satisfactory, but
also that the Client had actually proved that to them BEFORE the termination
letter.
And it gets better: it seems to me that the agency, by their
choice of the wording for this term, has taken on itself the role of being
judge and jury. People who accept that
role generally find themselves bound by basic principles called ‘natural
justice’ – these include telling you what the allegations actually are, and
giving you the chance to reply BEFORE making their decision. And we know THAT didn’t happen. So I would say that the agency here has
rather hoist itself by its own petard.
Finally, let’s look at the timesheet
issue: timesheets are no more than a
record of time worked, and the client’s signature on the timesheet may be taken
as the Client’s acceptance that the times are accepted as accurate.
Here, you are not claiming to be paid
for hours worked – you are claiming for hours which you would have worked, had the
Agency honoured the contract. But your
position is that you were in fact prevented from working those hours, because
the agency was in breach of contract.
So your claim to be paid for the notice period is in fact a claim for
damages for breach of contract, with the amount of those damages assessed at
the amount which will place you in the position in which you would have been,
had the agency not broken the contract.
I take it that you did your best to
mitigate your losses by trying to get another contract as soon as possible, but
were unable to find one which started before the end of the 28 day period. You will know from my previous articles that
if you had succeeded in doing so, then you would have to give credit against
your damages claim for sums received under that contract. So, clearly, since you are not claiming for
periods actually worked, there can be no question of a timesheet being
required.
13th
October 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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