How contractors should confirm contractual agreements via email

IR35 Test

Contractors should always have a signed contract before they start working on a project or at the client’s site. However, in practice, deadlines and delays sometimes mean that the paperwork has not been signed by the time the contract starts. However, by sending or exchanging emails, a contractor can ensure their interests are protected.

Having no signed contract right at the start is inadvisable, but is not usually a problem unless something goes wrong. And that’s when records of conversations and correspondence, including emails, between contractors and their agents and clients, are vital. They are likely to help quickly bring an end to disputes, or to provide the contractor with valuable evidence should the dispute escalate or reach the courts.

Even if a contract has not been formally finalised and signed, evidence such as emails can be used in resolving a dispute or in court to determine what was agreed and whether a contract was, in fact, in place.

What constitutes a contract?

There are three essential elements to all contracts under UK law, and these elements would normally form part of a written contract:

  • An agreement between the parties to the contract – usually the contractor and agency, or the contractor and client
  • A consideration, which means the agency or client will pay the contractor
  • An intention to form legal relations by all parties, whereby it is clear from correspondence that the contractor and the agency or client were planning to agree on a contract.

If one of these key elements of contract law is missing, if the dispute ended in court, a judge would rule that there was no contract between a contractor and the client or agency.

Commercial contracts would also normally include details of the contractor’s rates, the details of the project and its timing and how, when and by whom the contractor should be paid.

Verbal contracts

Although in theory verbal contracts are valid under UK contract law, and technically a verbal contract is made when the agent or client makes an offer which the contractor agrees, verbal contracts are notoriously difficult to enforce.

If a dispute reaches court, verbal contracts can be determined by a judge, who will look at what has already occurred – things like how much has the contractor been paid and what work have they been doing – and identify standard industry practice.

Contractors should follow up any verbal agreements made during an interview or over the phone in writing

Contractors should therefore follow up any verbal agreements made during an interview or over the phone in writing. That usually means sending an email, but could also include more traditional methods like faxes or recorded delivery letters.

Email confirmation of contractual terms

Immediately after discussing contractual terms with an agent or client by phone or face to face, contractors should follow up with an email detailing:

  • The parties to the contract, which would normally be the contractor’s limited company or contractor umbrella company and the agency, or the client if contracting direct
  • Rate of pay, hourly or daily, and whether additional payments, such as expenses or disbursements, are to be paid
  • How payment will be made – weekly on provision of a timesheet, monthly on invoice, and payment terms
  • Start date and duration of the contract, including number of hours in a day if paid on a daily rate
  • Specific contractual terms agreed, such as including a substitution clause, termination notice periods and so on.

The contractor should also ensure that the three key elements of a contract apply: that there has been an agreement; that a consideration (the rate) has been discussed and agreed; and that the agency or client clearly intend to hire a contractor for the contract.

In addition, contractors should carefully check their contracts when they arrive for signature, to be sure they include everything that was discussed and agreed. Once a contract has been signed, it will supersede what was previously agreed.

Confirming renewals by email

It is quite common for a contract renewal to be agreed verbally between an agency or client and the contractor. Sometimes this happens just before the contract end date, so the documentation may not arrive until after the contract officially ended.

In this situation, the contractor should also confirm any conversations and verbal agreements with follow up emails that detail the points above. Alternatively, if no changes have been requested or made by any of the parties, the contractor could simply confirm that the existing terms will apply to the renewal, then add the new dates.

Most contractors can work on multiple contracts for years and their contract paperwork will always arrive as agreed and without any hitches. But by taking the simple precaution of diligently following up key conversations with emails, contractors can be sure that any potential disputes will never even arise. And, if they do, the contractor will have the evidence of the emails they sent, making it easy for a judge to determine the true contractual position.

So the simple lesson is: for anything to do with contract negotiations, get it in writing and put it in writing!


Alliance Accountants

Published: Thursday, September 03, 2009

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