'After
6 months on a 1-year contract, I was called away from my desk one morning, to
be given a letter telling me my contract was terminated without notice, and I
was immediately escorted from the building.
I've not been paid for (or got timesheets for) my last 2 weeks
work. The agency claim that the
contract was terminated under a clause which says they can do so if the Client
says it is not satisfied with my performance.'
To
answer this question we should first look at the simple contractual relationship
between your company and the agency. I
have (of course!) read the entire contract.
In
addition to the express right to terminate on 4 weeks notice, the agency does
indeed appear also to have the right to terminate without notice in a variety
of situations, one of which is that the Client 'indicates to the agency that it
is not satisfied with (your) performance…'.
Let us assume (we have no reason to think otherwise)
that your termination was client-driven, and that the Client did so
indicate. Is it enough for the Client
simply to 'indicate' to the agency that it is not so satisfied, regardless of
whether or not there are any reasonable grounds for its alleged
dissatisfaction? The contract itself is
silent on that point. Certainly, when I
am reviewing a contract before it is signed I will generally seek to amend such
a term by words which make clear that there must be reasonable grounds. However, in this case there was no such
amendment, and we need to consider whether or not there is any basis on which a
requirement of reasonableness might be implied.
As a starting point, the words of a contract are
taken to include all the terms the parties have agreed will apply
to the relationship. However, there are
several possible ways in which additional terms or wording may be implied into
a contract.
In general, terms may be implied into a contract by
statute, or by common custom, or as a result of a previous course of dealing,
or by the Courts. We're interested here
in terms that might be implied by the Courts.
The Courts may imply a term if either (1) it is
necessary to do so in order to make the contract 'work' (a point which I don’t
think we can reasonably argue here);
(2) under the 'officious bystander' principle, if it appears that this
hypothetical person on the sidelines when the contract was made had said
'shouldn't you also add…' and if it appears likely that both parties would have
replied 'of course, it's obvious'; (3)
for completeness, a term may also be implied in the case of certain particular
types of relationship (eg landlord-tenant, or employer-employee), where the
overall relationship obviously intended would clearly be incomplete without the
term. Limitations common to all these
principles are that the Courts will generally not imply a term
either (1) simply because it might appear reasonable to do so, or (2) if the
term implied would expressly contradict other express wording in the
contract.
All the above may perhaps be summarised (albeit a
little simplistically) by saying that the Courts may imply where it is (a)
necessary or obvious, and (b) not inconsistent to do so.
Here, I think there a reasonable grounds for
implying a term to the effect that the Client's apparent dissatisfaction must
have some reasonable foundation (which is for the Agency to prove), so that the
term cannot be abused in order to get rid of someone on a whim, or for some
other reason. And I think we're also
supported in that by the fact that the agency had the wholly separate right to
terminate without cause on 4 week's notice.
Termination for cause, it seems to me, should clearly be interpreted as
being for reasonable cause. And let's not lose sight of the fact that
the Client had been happily accepting your services for the previous 6 months
without complaint; in view of that,
they may encounter a credibility problem in trying to show that you had
suddenly become so unacceptable that they were justified in terminating without
notice, without warning, and without giving you the opportunity to put right
what was (allegedly) wrong.
And there's another angle: the contract also contains a term saying that the Contractor will
remedy any incorrect or defective work in and at his own time and cost. To this term as well I think we can
reasonably imply additional wording, so as to provide that the Contractor
should be given (1) a proper indication of what is claimed to be incorrect or
defective, and (2) if it is so, then a reasonable opportunity to put it
right. Otherwise this term would have
no real commercial meaning (it might have an IR35 consequence,
but that is a wholly different matter).
You were not given such an opportunity - and that may well be a separate
breach on the part of the Agency.
So I think we have good grounds for saying that
unless the agency can show that (a) there were reasonable grounds for the
Client's apparent dissatisfaction, and also (b) for denying you the opportunity
to put right what was allegedly wrong (if indeed there was in fact anything
wrong), then the termination was in breach of contract, and in therefore
addition to payment for the services that were in fact provided, your company
is also entitled to damages for breach, which would generally be assessed at
payment at the contract rate, up to the time the agency could lawfully have
terminated without cause - so, 4 weeks in lieu of notice.
Finally, does the lack of a timesheet create any
obstacle to payment for the services you did in fact provide? I don’t consider that it does, although if
the Agency raises the point, it may also be necessary for you to bring your
claim against the Client as well, based on what lawyers call quasi-contract,
following the principle that the Client cannot reasonably have expected to have
the benefit of your services without also paying for them.
And now I've run out of space - which is a pity,
because I also wanted to look at this situation in the light of the 'nuclear
option' - ie your own personal rights under employment law. That, I fear, is something which will have
to wait for a later article - maybe next time!
15th
June 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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