Contractors' Questions: Is a non-payment clause fair?

Contractor's Question: I have a new contract causing me concern over the terms of notice. It says my contract can be terminated with immediate effect, without any payment in lieu of notice if a) the client requires, for any reason, the termination of services provided by the company, and b) the client has failed to pay the agency invoice in relation to the services provided by the company.

It's my first contract so I'm inclined to accept. But I am worried that if the client doesn't pay the agent (within 90 days), I could have to give money back or even may end up working for the client for free. Is there an alternative clause I could suggest that might be fairer to me and acceptable to them? Some say I should just compensate for the risk by upping my rate.

Expert's Answer: It is not possible to advise on isolated clauses of a contract as, if the matter ever went to court, the court would look at the contract as a whole and not just at individual clauses.

However, it's important to understand that there is a difference between terminating the contract and paying what they owe you.

Terminating the contract simply means that it is brought to an end. If this were the case, then you should still be paid for your work up to the time it was terminated but not for anything after then.

So, in the example you give, if the client is given 90 days to pay the agent and then doesn't pay, the agent can terminate your contract immediately. You should still be paid however for those 90 days unless, of course, there is something else in the contract that would prevent this.

As far as your final thought is concerned, from a commercial point of view, it is always important to charge a rate that properly reflects the risks you are incurring. In your circumstances, the central risk is that an immediate termination may mean you lose income until you can find another job.

The expert was Gary Cousins, a solicitor at legal advisors Cousins Business Law.