Contractor Doctor: Do contract terms still apply if I start the contract early?

Dear Contractor Doctor

I recently won a new IT contract that was originally due to start about a month after I first signed the contract. I was then quite pleased when the agency emailed me and told me to get over to the client immediately and start work.

But after about four weeks and just before the original start date, I got a series of emails from the agency telling me that I had been terminated. They said that technically the contract has not yet started, so the termination clause did not apply. This leaves me without work, and potentially with no notice period to find new work.

Do the terms of a contract still apply even if I start early?



Contractor Doctor says:

If a contract has been formed according to the basic principles of English law, then its contractual terms will apply, regardless of when the work under the contract is due to start. The key element is to determine if and when a contract between the contractor and the agency was formed, and what its terms actually are.

Following an examination of the precise wording of the contract and any correspondence between the contractor and agency, this may mean that Bryce could still be able to take advantage of any termination provisions, and could be entitled to payment for any notice period.

This is according Roger Sinclair of contractor legal specialist Egos, who highlights that: “The fact that a contractor’s contract provides for work to start at some future date does not in itself prevent the implementation of all of the contract’s provisions.”

When is a contract formed?

“Many of the cases that cover the formation of contracts go back to the nineteenth century,” continues Sinclair. “If you look at the situation in the conventional way, there are five elements required for a contract to be formed.

The fact that a contractor's contract provides for work to start at some future date does not in itself prevent the implementation of all of the contract's provisions

Roger Sinclair, Egos

“There needs to be an Offer by one party, and Acceptance by the other party. The acceptance needs to be Communicated, alongside a Consideration from both parties. Finally, there needs to be an Intention to create legal relations.”

The conventional analysis says that when all five elements are present, then the contract is formed. Each party then has an obligation to perform, according to the requirements of the contract.

An alternative, simpler, evaluation of contract formation

“There is another way of looking at whether a contract has been formed that is sometimes simpler,” suggests Sinclair. “Particularly with today’s technology, it is sometimes a little artificial to try and break down the events into a clear sequence of Offer, Acceptance, and Communication of acceptance.

“On this alternative view, there are but three elements to consider: there needs to be a point of time at which there is clear Consensus showing that the two parties have an agreement on all the core points.

“Again there needs to be a Consideration, so each of the parties must put something into the agreement. And finally, the Consensus needs to include an Intention to create legal relations.”

A contract has been formed

Based on the information provided by the contractor, viewed against either of the above sets of the contract formation principles, it appears that a contract has been formed between the contractor and the agency.

Sinclair says that it does not matter that under the written terms, work under the contract is due to start in a few weeks – the fact that the date has not arrived does not change the fact that the contract has already been formed. It is legally binding, and each party is entitled to expect that the other party will honour it.

“On the face of it, once the contract has been formed, any provision in the original contract that relates to termination is a term of the contract that has been formed, and so is likely to be applicable,” adds Sinclair.

The consequences of going onsite with the client early

The fact that the contractor was asked to go onto the client’s site early also has a bearing on the position. Sinclair explains: “Why did the contractor agree to start onsite with the client early? Presumably he did it, expecting that he would get paid for doing so. This suggests that there may well have been a variation of the contract.

“The variation may have been covered by the emails from the agency that the contractor mentioned: these emails and the contractor’s response may constitute a variation in the contract. What is the nature of that variation? Is it to advance the start date? We would need to look at the emails and the surrounding facts, in order to form a view.”

Based on the information available, Sinclair’s view is that it is likely that a contract has been formed between the contractor and the agency, that the agency has requested a variation by asking the contractor to start early, and the contractor has accepted that request by in fact doing so.

As a result, the contract has been varied, and all provisions of the contract would apply in relation to work done, and including any termination clause.

Sinclair concludes: “On the face of it, once a contract has been formed, all of its provisions apply, and they will mean what they say. Even if the contractor has not started work, that of itself is no reason why the termination provisions in the original contract should not apply.”

Published: Wednesday, October 15, 2014

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