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Contractors need to be careful in email negotiations to avoid early terminations

If you email what could be construed as a refusal to carry out a contractual obligation, this can result in your contract being terminated. So, if your client is itching to terminate your contract but you’re hanging in there because you still have a few weeks left to run, don’t give them ammunition by inadvertently providing a reason for them to ditch you in a poorly worded email.

This was confirmed in a Scottish court ruling in 2009 (Wyman-Gordon Limited versus Proclad International Limited). It came about because, when the two firms were negotiating the renewal of a supply contract, the supplier (the defendant in the case), sent a poorly worded email that was taken by the client as a refusal to meet their current contractual operations.

The client therefore assumed the contract to be terminated, a course of action confirmed as legal by the judge, who found that the supplier had ‘repudiated’, or failed to perform under the contract as a result.

Emails as valid as written correspondence

According to the judge, the customer (the claimant in the case) was entitled to immediately terminate the contract because the email suggested that the supplier no longer intended to perform its obligations under the contract. This resulted in the customer thinking that the contract was ended, and so they tried to claim damages from the supplier.

The Scottish judge confirmed not only that the emails were as valid as written correspondence, because emails have become the norm for business communication, but that the same principles of the ruling would apply under English law.

Failure to perform

The relationship between the two firms was similar to the one any contractor might have with their client – a medium to long term supply contract – and the two parties started discussing changes to the contract, all apparently in the spirit of continuing the relationship.

But at some point, the supplier sent an email to the customer saying they would only continue with the supply contract if the customer started bearing the risk of any defects in the end product the customer produced.

If you email what could be construed as a refusal to carry out a contractual obligation, this can result in your contract being terminated

Contractors and the ruling

This ruling shows that all contractors need to be vigilant and take care what they send by email or in a letter to their agency or end-user client, particularly when discussing contract renewals or renegotiations. If what is written by the contractor can be construed by the client as ‘repudiating’ the contract, they could be within their rights to terminate the contract.

The ruling applies whether you are a limited company contractor or an umbrella company contractor – in both cases there is a commercial business-to-business supply contract in place between the client and a contractor’s limited or umbrella company. And that contractor is covered by commercial contract law, not employment law.

Take care with what you write (or email)

So when your contract is up for renewal, if you really enjoy working on the project and think there is a chance of an extension, don’t scupper your chances by including in written or email communications any throwaway comments that could be misinterpreted.

But remember the ruling also works both ways – if your client proposes to change the conditions of your agreement mid-contract and the conditions genuinely aren’t working for you, then stay alert for any emails from the client repudiating the contract. They could give you the leverage you need to terminate your contract early without being in breach.

Published: 14 December 2009

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