Expiration Vs Termination - Termination Clauses Enforceable after Contract Expires? Expiration Vs Termination - Termination Clauses Enforceable after Contract Expires?
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  1. #1

    Nervous Newbie


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    Default Expiration Vs Termination - Termination Clauses Enforceable after Contract Expires?

    Hey all,

    I''m incorporated and contracting through an agency to a client.
    The contract I signed with the agency specified a 12 month term for consultancy services to their client. That term is to complete in the next few days, the contract will then expire.

    The contract had within it a termination clause:
    "9. RESTRICTION ON THE CONSULTANCY
    The Consultancy shall not and shall procure that the Consultancy Staff shall not for a period of 6 months following the termination of the Assignment supply the services of the Consultancy Staff directly, or through any other person, firm or company, to any Client for whom it has carried out the Assignment at any time during the previous 6 months. "

    Standard enough, a bind that stops you from quitting and just joining the client directly.

    What I want to know is this...

    In the UK would a contract with such a termination clause be enforceable after the contract naturally expires - i.e. the term length (12 months) of the contract expiring?
    I.e. is expiration = termination in this situation? Or in all situations? Or, does the expiration then negate this clause because the contract was not ended by an action that would define termination, (breach etc.) as "Termination is NOT expiration"?


    The contract has another point in it....

    "15.1. This Agreement shall commence on the date set out in the Schedule and shall continue until completion of the Consultancy Services to the reasonable satisfaction of the Client at which time this Agreement shall expire automatically unless previously terminated by the Employment Business or the Consultancy giving the other party the period of notice specified in the Schedule."

    When referenced in this way, the wording is presumably very ambiguous, but with emphasis in the right place expiration and termination could:
    (1)be referenced as two distinct states
    OR
    (2)it could be stating that termination occurs at the end of the contract if it is OR if it is not purposely ended by a specific action, i.e. termination occuring "naturally".

    I stand a little befuddled and in want of a definition of expiration vs termination.

    Anyone?

  2. #2

    Fingers like lightning


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    You could argue that the words termination and expiration have slightly different meanings. That is, termination requires some sort of event or intervention to bring about an ending, whereas expiration does not.

    Whether there is any point to this augment is another matter.

  3. #3

    My post count is Majestic

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    Either way you have a handcuff in place. 12 months won't stand up as fair and reasonable though and the biggest issue you have is the agency will kick up a fuss and the client is more likey to just drop you rather than get embroiled in a legal argument. There is virtually no chance this will go legal but every chance the hassle won't go your way.
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  4. #4

    Fingers like lightning


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    I understood it to mean that the contract length was for 12 months and the hand-cuff was for 6 months.

    Whether they have nullified this handcuff by using the expressions they have used (termination, expiration) I wouldn't know, maybe someone with experience reviewing contracts per chance.

    At the end of the day for my money, the contract is an attempt to formalise an agreement, I suspect that many times they are not water tight but they never get tested in the courts because the money at stake is not worth it and life is too short.

    I'd look at what sort of relation the agency has with the end client, if the end client can tell them to clear off then there might be something there for you. I'd also watch out because if you feel are looking at this because you don't like the idea of the agency model, then you could find yourself testing the contract in court (and you could let us all know how it went!)

  5. #5

    Faqqed Off

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    Quote Originally Posted by northernladuk View Post
    Either way you have a handcuff in place. 12 months won't stand up as fair and reasonable though and the biggest issue you have is the agency will kick up a fuss and the client is more likey to just drop you rather than get embroiled in a legal argument. There is virtually no chance this will go legal but every chance the hassle won't go your way.
    It's not a 12 month restriction - it's six months at the end of a 12 month contract.

    Which IMHO would stand up as fair and reasonable.

    The other factor to consider would be whether the OP opted out of the agency regulations correctly - if not, then the handcuff expires eight weeks after the end of the contract.
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  6. #6

    Lord of the Vectras

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    I like your thinking, but as the language is undoubtedly approved by the agent's lawyers (and I'm sure every one I've had has used the same word) it doesn't seem very likely your argument would stand up.
    Will work inside IR35. Or for food.

  7. #7

    I live on CUK

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    Expiration does equal termination.

    Don't try to be too clever.

    Oh and the handcuff clause is written in such simple terms that it would be enforceable in most cases.
    "You’re just a bad memory who doesn’t know when to go away" JR

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    If this is a different department at the client, shouldn't be a problem.

    Contractor doctor: are restrictive contract clauses enforceable?

    if you worked in Section A of the company, the courts won’t enforce a clause that says you c an’t work in Section B (unless there is a very clear reason for it).
    I think if the agency give you notice then the clause is null and void, if the contract is simply not renewed then it's valid within reason. If the agency try to use the clause to put the rate down, then it would probably be considered unreasonable, i.e. telling you if you want to continue with the client take a 10% cut "or else".
    Last edited by BlasterBates; 11th April 2015 at 11:23.
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  9. #9

    I live on CUK

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    Quote Originally Posted by BlasterBates View Post
    I think if the agency give you notice then the clause is null and void, if the contract is simply not renewed then it's valid within reason. If the agency try to use the clause to put the rate down, then it would probably be considered unreasonable, i.e. telling you if you want to continue with the client take a 10% cut "or else".
    You can think but until it's tested in a court you can't assert anything. Even a QC's opinion is just that until a judge rules on your case.
    "You’re just a bad memory who doesn’t know when to go away" JR

  10. #10

    More fingers than teeth

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    Quote Originally Posted by SueEllen View Post
    You can think but until it's tested in a court you can't assert anything. Even a QC's opinion is just that until a judge rules on your case.
    It's risk assessment, if you want a risk free contract you go permie.

    Even if Bauer and Cottrell have said your contract is IR35 compliant you won't know until you've been through an investigation and the judge bangs his hammer down and says it is.

    Here are the legal arguments:

    How contractors should handle restrictive covenants: part 2 - the law


    Agencies sometimes will try to lock you in to specific contract terms when contracts come up for renewal, and then cite the restrictive covenant in the contract to prevent you from working direct with the client. This isn't enforceable in law.
    In determining what a legitimate protectable interest is, the courts will apply the 'Elephant Test.' This is a truly lawyerly invention: try and explain what an elephant looks like; you will find that you can't. But you know what an elephant is, and you recognise one when you see it. This is how the courts will seek to determine if there is a legitimate protectable interest--i.e. does it sound like it is fair?

    So if, when contract renewal time comes up, an agency says that you must accept a lower fee to do the same job for the same client, or that you should do two jobs for the same money, just say that you will go work directly for the client if the agency insists. When the recruitment consultant at the agency threatens you with the restrictive covenant, just cite this article and warn that the consultant is out of line.
    In other words if you are not screwing the agency you should be alright and the law supports you on that, admittedly using rather subjective legal arguments.
    Last edited by BlasterBates; 11th April 2015 at 12:38.
    I'm alright Jack

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