‘After the first 4 weeks of a 6-month contract I was told by the project manager that as a result of a difference of opinion within the project team, my contract was to be terminated. The agency subsequently sent me a letter listing half a dozen reasons, all of which are wholly untrue.’
You entered a contract whereby your services were to be provided for 6 months. In such contracts one almost invariably finds a provision whereby the agency has the right to terminate the contract on 4 weeks notice. As a principle, that’s generally not unreasonable, and allows for a degree of flexibility, and for the fact that plans can change. Indeed, the attractions offered by such flexibility is one of the reasons why the market for Contractors has been able to grow so dynamically over the past few years.
Most Contractors nowadays will insist on a reciprocal provision, giving them the same rights to terminate on notice – in my view, quite rightly; it seems to me unreasonable that one party should have rights which the other does not share. But what we have to consider here is the rights of the agency to terminate on shorter notice.
The legal starting point is that, in the absence of any express contractual terms covering the point, where one party to a contract is in breach of contract, the consequences of a breach will depend on the seriousness of the breach itself, and on the importance of the broken term in the context of the contract as a whole.
Breach of a minor term may permit a claim for damages for breach; more serious breaches – generally ones which show that one party has no intention of being bound by the contract - may also relieve the innocent party of further obligation to perform; in other words, such breaches may give a right to declare the contract terminated by breach. Against this background, it can often be difficult to decide whether or not a breach of any particular term is sufficiently serious to give rise to a right to terminate.
Certainty in commercial relations is very important – both you and the other party to your contracts should know exactly where you stand. For this reason, the common-law rights to terminate I’ve set out above are often modified by express contractual terms, giving one party or the other the express right to terminate without notice. if certain events occur.
You will often see terms giving one party the express right to terminate if the other is in material breach - meaning serious; non-trivial – something more than sending your timesheets in 2 days late. When I review contracts for Contractors I will generally expect to put in a term giving the Contractor the right to terminate if a payment from the agency becomes more than 7 days overdue – that’s serious! Overall, such terms improve certainty, and make it easier for each party to know exactly where they stand. In my view they are also terms which should be negotiated in such a way as to work equally both ways – at least, so far as is realistic.
Here however we have an express term which goes further than that – the agency has the express contractual right to terminate the contract without notice, if the Client finds you ‘unsatisfactory’. Words in contracts generally carry their ordinary English-language meanings, and it seems to me that the question of whether something or someone is ‘unsatisfactory’ (1) is one which can only be answered from a subjective point of view, and (2) is quite capable of being answered ‘yes’ without any fault on the part of the other party.
That being so, it seems to me that it matters not whether or not the termination is then ‘justified’ by the agency producing a list of reasons which you regard as ranging between spurious and untrue – the bottom line is that termination has clearly been initiated by the Client declaring that it found you ‘unsatisfactory’, and, as a result of the contract you signed, you have given the agency the express right to terminate in that event. Rightly or wrongly; reasonably, or unreasonably.
Imagine how an agency or a Client would respond to a request by you as a Contractor that you should have the right to terminate without notice – to walk – if you found the Client or the position ‘unsatisfactory’ Fairly negatively, I suspect. The whole point of entering a contract is to provide a degree of certainty – that the Client will have your commitment to provide your services, and that you will be able to depend on the source of income. Unbalanced terms allowing one party to terminate without notice for purely subjective reasons, and without fault on the part of the other party, are to my mind unacceptable.
Like so many problems which can (and from time to time inevitably do) arise in the course of contracts, this one could have been avoided by a determined refusal on the part of the Contractor to accept a contractual term which gave the agency the right to terminate without notice, in the absence of fault on the Contractor’s part.
12th November 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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