‘My agency contract is coming to an end. When I originally negotiated it, I got the
agency to agree not to impose a restriction on me. I now want to go to the same client, but direct. The Client tells me however that there is a
restriction in their own contract with the agency, and
is nervous about taking me direct.’
In general terms, most readers will know that it is open to
parties to a contract to agree the terms that will apply between them. The true meaning of the contract will then be
interpreted by looking at what they have agreed, and viewing it against the
background of an overall legal framework, which may (under various principles)
imply certain additional terms to cover points that the parties did not
themselves expressly cover but which may nevertheless be taken as having been
part of what they had in fact agreed, and which may also disregard certain
terms the parties expressly agreed, if what they agreed nevertheless infringes
some overriding legal principle.
It’s also the case that under common law, in general the
only people who can benefit from a contract (ie are entitled to sue under it,
or be entitled to a protection given by it) are those who were parties to
it; this ancient rule has however now
been modified by the Contracts (Rights of Third Parties) Act 1999, and it is
now the case that if it appears from the terms of a contract that an
identifiable third party is intended to benefit from a contract, then that
third party will in fact do so. This can
operate to give a third party rights under the contract (even though not a
party to the contract), and those rights may either be absolute, or qualified
by other terms of the contract. It
cannot however go so far as to impose obligations on that third party – which
is fairly logical, when one thinks about it.
So that is the background against which we will have to
consider your problem. We have (1) a
contract between you / your company and the Agency, which contains no
restriction (the background to this being that it was negotiated out, so to
speak) – the contract being silent on the point; and (2) a contract between the Client and the
Agency, which does contain a restriction – a fact which you have only
discovered recently, and the wording of which we have yet to see (and because
of this, we cannot form an opinion on its enforceability under the
‘unreasonable restraint of trade’ principles which govern such matters).
On the face of the contracts, there is nothing to stop YOU
from working for the Client directly – the restriction in the Client-Agency
contract is not binding on you; however, there appears to be something
to stop the Client engaging your services in the Agency-Client contract. And if that remains the overall position,
when we have considered the contracts against the background of the various
matters mentioned above, the end result will be that you have not achieved what
you wanted to achieve – not because of any legal restriction binding on you,
but because of restrictions which may binding on (and at the least are influencing)
someone else – the Client.
Are there any other terms to the contract between you and
the Agency which are not in fact documented in the contract? If your contract does not contain a term
saying eg ‘this document represents the entire agreement between the parties’,
then this may open the door to enable us to look at other evidence
(contemporaneous records - eg emails – would be ideal) between you and the
agency, dealing with the reasons why the restriction in your contract was
‘negotiated out’ – if there was something here making it clear that the purpose
(agreed between you and the Agency) was to enable you and the Client to deal
directly after the contract through the Agency ended, then it may be possible
to say that by retaining a restriction in the Agency-Client contract, the
agency was in breach of your contract – either of an express
term which was contained in such other contemporaneous records rather than in
the main contract itself, or of an implied term, either necessary to cause the contract
to have the mutually agreed effect, or under the ‘officious bystander’
principle. If so, then the Agency may be
liable to you for damages, for your resulting losses – a potentially
substantial claim.
But can we say that you have achieved nothing by having the
restriction removed from your contract?
I don’t actually think we can, because if the Client were to engage you
direct, the lack of a restriction in your own agency contract would mean that
the Agency would have no cause for complaint against you. They might have grounds for complaint against
the Client, but that is a separate matter.
You have achieved something – though whether that something is worth
having – or is what you had in fact wanted – is another matter. So I don’t think we have a basis on which we
could imply something more that, in the absence of some evidence that more than
that was agreed to have been intended.
Can we show that the lack of a restriction in your contract
is something the Client can take advantage of under the Contracts (Rights of
Third Parties) Act 1999? I suspect not,
because such rights would be wholly inconsistent with the express terms of the
Client-Agency contract. It seems to me
that this would be well outside the scope of the 1999 Act.
Can we show that the Agency in fact lead you to believe that
you and the Client would be free to deal directly once this contract had
ended? If so, and if you can show that
you entered the contract in reliance on this, then you may have the basis of a
claim against the Agency for misrepresentation.
Again, that could be substantial.
In an ideal world, of course, your contract would not have
‘contained’ the simple absence of a restriction, but also an assurance from the
Agency that it would not seek to impose such a restriction on the Client which
might interfere with any direct dealings.
But then it’s easy for us all to enjoy the
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.
[Return to Roger Sinclair's 'Welcome' page]
No liability is accepted for any inaccuracy in the information in these pages - see full disclaimer
© Roger Sinclair roger@egos.co.uk 2001 - All rights reserved - see full copyright details
The information on these pages is provided free and for information only, and is provided 'as is'. Whilst believed to be correct, it is in no way comprehensive. It is provided for your interest only and is not intended to be relied on as formal legal advice. The posting of information on these pages is not intended to create a lawyer-client relationship, and you should not act or rely on this information without seeking professional advice. No liability is accepted therefore for any errors, or for any losses that may be incurred if it is relied on.
You may read these pages on-line, and download them to read later, for
your own personal use.
This copyright notice must appear on every page that you print from here.
You must not redistribute these pages or any part of them in any form or medium
without first obtaining my consent.
You are welcome to set up links to this website from others.
[Return to Roger Sinclair's 'Welcome' page]