The false security of '1 month's notice'

- a 'Freelance Informer' legal article from Roger Sinclair

'I recently signed a contract with an agency to work in Germany for a year. I took the contract and accepted the rate because I fancied being there next summer. Now I find the agency's contract with the Client is for 6 months only.'

Your contract has express provision, either way, for termination on four weeks' notice. Several consequences follow from this:

First, you have the absolute right to terminate at any time, on giving that period of notice. If you give that notice, work it, and leave when it expires, then you will have fully performed your own obligations under the contract, and will be released from any further liability under the contract (apart only from any terms which survive termination - terms relating to confidentiality, and restrictions on going direct for a period would fall within this category).

The agency too has an absolute right to terminate at any time on giving that contractual period of notice - again, without having to specify reasons, and even if you yourself are not in any way in breach of contract.

The third consequence is more subtle:

• if a party is in breach of contract, and
• if the other party accepts that breach as terminating the contract,

then any damages the guilty party may become liable to pay will be limited to losses for the period up to any date when the guilty party could have lawfully terminated the contract - ie by taking advantage of any express contractual right to give notice.

If the agency's in breach, but has the right to terminate on 1 month's notice, then the damages they will have to pay are limited to what they would have had to pay if they had exercised their rights to give notice. Likewise, if you were in breach (eg by leaving early and without giving notice), then the damages you would be liable for would be the commission the agency would have made during the month's notice that you could/should have given.

This follows from the general legal principle that damages for breach of contract are intended to put the innocent party in the position in which (s)he would have been, had the contract not been breached. Damages are not intended to go further than that. Whether you think that right or wrong, it's what the law provides.

Relating all this to your position:

1. In the absence of any term in your contract expressly stating that the duration of the Agency-Client contract is the same as the duration of the Agency-Contractor contract, I don't see that there is any breach by the agency. You cannot therefore declare the contract terminated by breach.
2. There is nothing to stop you from giving 1 month's notice yourself, at any time - now, if you like. (Or, for that matter, from giving notice, and then offering to accept a new contract at a higher rate, to compensate you for the German winter - but be warned, once given, notice cannot be retracted without the agreement of the other party.) Provided you work the month, there will have been no breach, and at the end of the month, you will be released from any further obligations to perform the contract (subject only to continuing obligations - see above).
3. The agency might wait until the first 5 months have run, and then give you 1 month's notice to terminate. Their only responsibility then will be to provide work and pay you during the period of notice. If they do that, then your contract will terminate after 6 months, perfectly lawfully. There will have been no breach of contract, and so you will have no claim against the agency for damages.
4. Alternatively, wait and see; it might be that after 6 months, the agency will sign a fresh contract with the Client for an extension - in which case you would be able to continue to work in Germany under this contract for the whole 12 months.

In short, it seems to me that the law of contract offers you no remedy. You may have only accepted because you anticipated the summer in Germany. You may have made a commitment to rent a flat for a year. But the bottom line is that even though your contract states the period is a year, it is terminable by either party on 1 month's notice, and so it offers no longer security than that one month period.

Just one thing: if you were persuaded to enter the contract by the agency's untrue representation that they had the client secured for a whole year, and if the contract does not contain any statement to the effect that you did not enter it relying on any representation, then it is possible that you would have the right to rescind the contract on the grounds of misrepresentation. If so, you might also be entitled to damages for misrepresentation (unless the agency can show they had reasonable grounds to believe the contract would have been for a year) - in which case, the damages would be assessed according to different principles, and would not be limited to the one month's notice set out above.

13^th November 1998

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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