‘I had a choice of two 6-month contracts. Contract A (i) was further from home, and
(ii) paid more than Contract B. I
accepted B. I then discovered that the
need for me with Client B would only last 5 weeks – and that the agency had
been told this at the outset (I saw the Purchase Order) – the Client told me
that when they saw the ‘6 months’ bit in their contract the agency simply
replied ‘just give 2 week’s notice after the first 3 weeks’. Which is what they in fact did.
The
Contract
The contract was for a 6 month period, but contained
provision for either party to terminate prematurely on 2 week’s written
notice. It contains a term saying that
the Agency ‘…has
obtained for the Company an engagement with the Client under which the Company
will procure the provision of the Services…’.
It does not contain what
lawyers call an ‘entire agreement’ clause (essentially, a clause which says
that the only terms are those written in the document itself), and it says
nothing about representations.
Contractual position
From a
simple contractual point of view, where you have a contract for a period, which
contains express provision allowing a party to terminate early on notice
(without some fault of the other party), then if that party actually does give
notice and terminate, the other party has no cause for complaint. The terminating party is doing nothing more
than implementing one of the opportunities built into the contract at the
outset. The law would regard the parties
as having envisaged at the start that the possibility might arise that a party
would wish, for whatever reason, to terminate early; as having made specific provision in the
contract for that eventuality; and as
having then acted in accordance with those provisions.
It would
also generally be the case under contract law that in such a situation, even if
the contract were terminated by the other party unlawfully – in breach of
contract (eg without giving the required notice), the damages that the innocent
party would be entitled to will be limited to the amount it would have expected
to receive if at the point of breach, the other had instead given the notice it
was lawfully entitled to give.
It is also
doubtful that the term saying the Agency ‘…has obtained for the Company an
engagement…’ will help us either here, because the Agency did in fact obtain a
contractual commitment from the Client for the 6 month term – although it might
well be otherwise if the Agency-Client contract had been for a shorter period.
Overall,
from the point of view of the simple law of contract, there is probably little
you can do. The Agency had the right to
terminate early; and they exercised that
right.
Misrepresentation as a term of the
contract
Here we may
be on stronger ground. The fact that the
contract does not contain an entire agreement clause, and makes no reference to
representations may open the doors to other possibilities.
A
representation may be viewed as a statement made or affirmed by one party, the
truth of which that party knows the other is relying on in taking its decision
to enter the contract. In the absence of
an ‘entire agreement’ clause, it may be that we can show the representation was
incorporated as a term of the contract, even if not written into the document –
provided of course you can prove that the representation was in fact made, and
that they knew you were relying on it.
Your own word may be sufficient to prove this, although emails etc at
the time containing relevant information would give greater certainty.
If we can
show that a representation (eg that the Agency knew no reason why the contract
would not last the whole 6 months, and that they knew you were relying on this
statement in taking your decision to enter it) was made and then became a term
of the contract, and if (as I think we can) we can then show that that
representation was false, then you may have a claim for damages for breach of
contract, based on breach of the term which became part of the contract as a
result of the representation.
Misrepresentation which did not
become a term of the contract
Even if we
weren’t able to show that the representation became a term of the contract (eg
because of the presence of an entire agreement clause), all would not
necessarily be lost. As long as the
contract did not contain a term which said that you had not relied on any representations in entering the contract, you may
still have a claim – not under the contract itself, but for
misrepresentation.
Misrepresentations
are categorized as innocent, negligent, or fraudulent. Which category they fall in has an effect on
your remedy. Here, if we can show that
at the time of the representation, the Agency knew it was false, then it would
fall into the category of ‘fraudulent’.
That then would give you a claim for damages to compensate you for your
losses suffered as a result of relying on the representation.
Given that you
can show that you had another contract on offer at the time, then the measure
of those damages would probably be what you would have earned under the other contract, less what you earned
under this one, and less allowance for the additional expenses of performing
the other contract. You would still have
an obligation to mitigate your loss, by doing all you could to find another
contract as soon as practicable, and to also give credit for what you earned
under that new contract during the relevant period.
The acid test
The key
point on which all the above logic depends is this: can you prove it?
When things
are said in the course of contract negotiations that you rely on in taking your
decision, then at the least it is important to record (1) what was said, and
(2) the fact that you are relying on it, in order to preserve your
position. An email from you to the
Agency just confirming these points may well be enough to deflect a later claim
from the Agency that either (1) they didn’t say it at all, or (2) that they
didn’t know you were relying on it.
11th
August 2001
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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