It seems the recession is driving some contractors, agents and clients to cut corners – sometimes for understandable reasons, as people are keen to get deals agreed and work underway as soon as possible.
But, as often happens when corners are cut, it can lead to things unravelling. And an ongoing stream of recent questions to the Contractor Doctor reveals that is happening now, with contractors, agents and clients all learning to their cost the perils of not being thorough in contract negotiations.
Many moons ago I was personally let down by an ex-colleague who had offered me a contract starting in a couple of weeks for a pitch he had been working on. "Definitely going ahead," he said. At a plum daily rate I put my feet up and waited for it to all happen. Turned out that it wasn't quite as definite as he said, and a few of us had been 'kept on hold' to aid his pitch. The same thing has probably happened to a few of you, either with clients, agencies, or other contractors. But not all is lost, because provided a contract has been legally formed, and you can prove it, then you don't have to have the physcial contract paperwork in place to make a claim and make up your losses - the loss being the opportunity cost of not lining up a contract elsewhere.
So now, perhaps more than ever, is the time to make sure that anything agreed verbally over the phone or in a meeting is promptly and accurately confirmed in writing. Because inevitably, if something does go wrong, the burden of proof will be with you, the contractor, and you’ll have the most to lose as a result of any dispute. And confirming contract details via email will go a long way to having the proof you need.
As Roger Sinclair of contractor legal consultancy Egos explains, every contract requires three things to be valid: agreement on terms, the consideration (ie, the rate) and a mutual intent to enter into a legal arrangement.
Whilst this means that it’s not strictly necessary to have a formal contract signed, sealed and delivered, it does mean that the onus is on each party to – especially the contractor – to accurately record and confirm any verbal agreements made. That way, if there is a dispute, confirmation in writing can remove a whole load of doubt from the equation.
So, for example, if a contractor has received a verbal offer from a client, which they follow up with an email confirming the contract’s terms, by arriving at the client’s site on the start date, the contract is likely to be judged valid and executed.
According to Sinclair, if the confirmation of terms and rates (the consideration) outlined in the emailed confirmation are not challenged, this demonstrates consensus. And, if the contractor arrives on site and the client allows the contractor to start work, all three of the basic components of a contract have been satisfied.
However, it becomes a little more complicated if an agent is also involved, as there are two contracts that have to be considered separately: contractor-agency and agency-client. So the contractor could execute the contract with the agency, but not the agency-client contract.
As reported in this month’s ContractorCalculator Market Report, the end of the recession might just be in sight, but for some UK contractors the situation is likely to get worse before it gets better. They should take care to ensure that this tough market doesn’t lead them into cutting corners on contract negotiations.
So, the key point still remains – never start a project without a signed contract. But if circumstances force you to do so, make sure you’ve recorded every stage of the negotiation with a written confirmation to all the parties. Never rely solely on a verbal contract, as proving it can be very difficult (sometimes close to impossible) and potentially costly.
Verbal contracts are simply not worth the paper they’re not written on!