Contractors' Questions: Is my agency contract unfair?

Contractor's Question: I did some contract IT work for a third party via a recruitment agency. In the agency's terms and conditions, they say they will only pay the contractor if and when their client pays them. But it's been more than 30 days since my umbrella company emailed an invoice to the agency, and I may charge interest, as per the Late Payment of Commercial Debts Act 1998. Does the said-clause in their T&Cs sound lawful? Since the contract is between me (well, technically my umbrella company) and the recruitment agency, should payment to me really have to depend on their client paying them?

Expert's Answer: Firstly you need to look at your contract. However there is certainly more than one way of interpreting the agency's clause. Ordinarily that is a bad thing, as generally 'legal certainty good; legal uncertainty bad.' Therefore and where possible before signing any contract, in the minimum we always advise you to look it over and query any points that you do not understand. However, in your situation the contract has already been entered into. This changes your options.

As a result, you need to consider the law. In one sense it is good that at least you have a termination clause (make that two), as having no termination clause can tie you to the full term of the contract, which may not be desired from your side.

Generally, a contract contains a 'severability clause,' which means that if a portion of the contract is found to be invalid, perhaps because it is unduly onerous, severing of the portion does not affect the validity of the contract. A severable contract is a contract that is actually composed of several separate contracts concluded between the same parties. Without seeing the full contract, we are unable to comment if, in fact, you have a severable contract.

In summary then the rest of the contract would need to be viewed, and the correct interpretation of the termination provisions in it would need to be ascertained from the contractual relationship between the parties, which may include many factors included in the contract and beyond. In terms of beyond the contract, our considerations would include the other clauses, previous dealings between the parties, size of the parties involved, which side drew up the contract and length of time given to consider the contract pre-signing. In other words, we would identify which of the clauses appears the most likely to be a fair reflection of the contractual position.

So what can you do? Your options include :

- Revocation of the contract on the grounds that undue influence was placed on you in signing. But this is unlikely and a little heavy-handed at this stage

- Termination of the contract under one or other version of the termination clause. Though this does not seem to be a goal

- A separate agreement between the parties as to which termination clause is appropriate. Yet this may risk 'rocking the boat' unnecessarily and giving the impression that you are having negative thoughts about the contract and/or the other party

- Renegotiation of the contract terms. Again though, this may seem unnecessary to the other party, and will involve time and inevitably money

- Continue as previously, aware that a court of law is likely to favour the broader version of the termination clause

To sum up, only you know the balance of power in your contractual position and whether you feel you wish to test this, so the above advice can by definition be only generalised. You must consider your options and the importance of this point, and if you feel you need certainty, get tailored legal advice.

The expert was Tim Mount, of Lawdit Solicitors.

Sunday 11th Apr 2010