Contractors' Questions: Can a contract offer for May be guaranteed now?

Contractor’s Question: Can I get a business to guarantee the offer of a contract in a few months’ time, with compensation if they cancel it? What approach would be acceptable to the business, and how do I ensure that what they agree to would be legally enforceable or open to my challenge if they renege on it?

Expert’s Answer: I can see no reason, in principle, why a legally binding and enforceable agreement cannot be made to this effect. The key, to my mind, would simply be to:

  • get the understanding as clear as possible in simple and unambiguous terms, and
  • incorporate that understanding as a term of the contract.

It may be worthwhile to include a few words as to why a cancellation fee is considered appropriate.

It would be wise to describe the payment not as a ‘penalty’, but as a ‘cancellation fee’ (although the law in relation to unenforceable penalties has eased somewhat, as a result of a recent case).

So, for example, you would sign a contract now for work to commence (say on 1st May 2017), and incorporate a provision that the client had the right to cancel the contract by notice in writing at any time before the start date, and that if the client were to do so, a cancellation fee of ‘£x’ would be payable within 30 days.

You could, if appropriate, have a sliding scale of cancellation fees, according to how close to the start date the client gave notice to cancel.

You would need to make sure that the cancellation provision could not be undermined by other termination provisions in the contract. Good luck.

The expert was Roger Sinclair, legal consultant at contracts advisory egos.

Wednesday 11th Jan 2017
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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