'I had a contract through an agency for a client; a month before it was due to end, the client said it had run out of work for me to do. The agency told me to wait while they tried to find me another contract, and assured me that I would still be paid. I did nothing for a month, and the agency paid me in lieu of notice. Then I started another contract for the same agency with another client. The agency has withheld payment of the second month's invoice under that contract, claiming they have had a problem in getting payment out of the client under the first contract for the period in lieu of notice.'
I've read both contracts, and I have to say that it is quite clear to me that (in the absence of any specific agreement to the contrary), there is no way I can see that would justify them in trying to claw back the payment by deducting it from a payment due in respect of a separate invoice under a later contract.
Under the terms of the first contract, you were entitled to one month's notice to terminate. In fact you did not get that notice, but that matters not, because by the time a month's notice had run out, the contract itself would have ended. The Client had no work for you to do, and the agent expressly told you to await further instructions, and assured you that you would be paid. And you were paid. So it seems to me that when that point arrived, everybody's obligations under that contract had been fully performed, and the contract was at an end. It became history.
The agent now claims that you should not have been paid for that last month, because no time sheets were produced. Leaving aside the fact that it is clearly nonsensical for the agency to expect timesheets for a period when no time was actually spent 'on the job', it seems to me that one is entitled to expect that any points on which payment depended should have been raised and queried before payment was made; and that, in the absence of any such queries, the actual making of payment must have operated as a waiver of any points that were outstanding. And once waived, it cannot now be open to the agency to 'unwaive' them.
But even if the agency did have a valid claim against you for repayment, that would not give them the right to unilaterally deduct such a claim from money due to you under a separate contract. You are therefore entitled to take the view that by failing to make payment, the agency is clearly in breach of contract.
Under the contract terms, you are entitled to invoice monthly, and to be paid within 10 days of invoice. For reasons I have dealt with in greater depth in recent articles, you may not have the right to terminate a contract when an invoice is overdue, without warning. So the first thing you need to do is to make time for payment of the essence of the contract by writing to the agency, making clear that they have no lawful right to make this deduction, and stating that unless payment is made in full within (say) the next five working days, then you reserve the right to regard the contract as terminated by their breach, and then to bring a claim against them for all monies due under the contract, and for damages for breach of contract. With a bit of luck, such a letter will bring them to their senses and cause them to reconsider their position carefully.
If after such a warning you were to terminate in such a situation (ie as a result of a breach by them, by which they have shown that they do not themselves intend to honour the contract), then you yourself would be released from any further contractual obligations on your part, including release from any restriction on providing your services to the client, other than through the agent - so long as that restriction was in the same contract. It is worth bearing in mind however that if such a restriction had also been contained in any other agreement between you and the agent (eg a separate document, possibly also covering such matters as confidentiality etc) then provided the agent was not in breach of that agreement, that other restriction might well remain in force.
So far as the Client is concerned, the contract between the agent and the Client almost certainly provides that the agent will make your services available to the Client; it therefore ought to follow that since your contract with the agent has been terminated by you as a result of the agent's breach, then the agent will no longer be able to provide your services to the Client, and will therefore also be in serious breach of that contract - with the result that the Client too should be released from any further obligations to perform its own obligations - including any restriction which may be in it. But I've not seen the Client's contract, and it really is for the Client to make up its own mind about its position. If you want to know what a contract means or what its effects are, the first thing you have to do is to read it!
11th July 1999
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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