Contractors who have a basic grasp of contract law are often in a much better position to understand whether to seek legal advice when less scrupulous recruiters ‘try it on’.
That’s certainly the conclusion we can draw based on the questions to our Contractor Doctor, and the responses by our expert legal contributor Roger Sinclair of Egos.
Many contractors, particularly first-timers, have not evolved their thinking beyond being an employee and believing that they are still entitled to employment rights. For limited company contractors, that is no longer the case, although umbrella company contractors still enjoy rights from their umbrella solutions provider.
The fate of limited company contractors is largely governed by contract law, because the relationship they have with their client, or more usually their agency, is a business-to-business contract-based transaction, and not an employment contract.
And that’s why a basic understanding of contract law is important, so that contractors know when to reach for their lawyer. Particularly in cases where the legal situation might be viewed as counter-intuitive.
This was certainly the case for one contractor who was unable to work due to illness and was sent a £3,000 bill by the agency. Fortunately, Sinclair introduced some important common law principles that are applied to contracts.
On the face of it, many contractors would decide that because they were not able to provide the services according to the contract, they must be in breach and simply roll over and pay up, not realising that under some circumstances contract terms can be implied.
In the case of being unable to deliver services due to illness, the ‘officious bystander’ test might convince a court – should it get that far – that of course a contractor could not deliver on contract if they are ill.
The same Contractor Doctor question introduced the concept of a ‘frustrated contract’. The point here is that events can render a contract impossible to complete, or radically different. This would also mean the contractor was not in breach, as he assumed.
Another Contractor Doctor question highlighted a further important principle of contract law. In this case, simply by threatening to not pay a contractor without good reason put the agency itself in breach of contract.
Sinclair explained that the agency has made this ‘anticipatory breach of contract’ by basically saying, ‘Yes, I know the contract says I have to do this but I am not going to do it’. The response by many contractors would have been to cave into the agency’s demands.
Contractors don’t have to become proto-lawyers, and when in a serious dispute should always seek professional legal advice. They should also use their understanding of basic contract law to ensure they don’t behave badly to the agencies and clients who provide them with work and a livelihood.
However, a good understanding of the basic contract law principles enables contractors to know when an agency is being unreasonable and when to seek that professional help.