New contract with bizarre provision for payment for no work

[fiddlesticks]

I've been contracting since 2007, and have recently got a new contract direct via some trusty folks I've worked with before. I've had the contract reviewed for IR35, and the reviewer has asked my new client to remove the part in bold below:

The Consultancy Company shall be engaged by <company> under this Agreement with effect from the date of this Agreement unless terminated by either party giving to the other written notice of not less than that set out in each Statement of Work or <company> making a payment in lieu of any Fee due to the Consultancy Company under any Statement of Work for such notice period.

This clearly fails the "mutuality of obligation" test, and yet the client has refused to remove it.

Any thoughts? Should I steer clear?

[LondonManc]

I've been contracting since 2007, and have recently got a new contract direct via some trusty folks I've worked with before. I've had the contract reviewed for IR35, and the reviewer has asked my new client to remove the part in bold below:

This clearly fails the "mutuality of obligation" test, and yet the client has refused to remove it.

Any thoughts? Should I steer clear?

So the client is insisting in a clause where they're allowed to pay you off?

If so, what sort of pay off are they talking about?

[northernladuk]

Any thoughts? Should I steer clear?

That question is really up to you and your appetite for risk. What did the review class the contract as with this statement in? Fail? Marginal? Let's assume it's a fail...

So it's not a matter of should you stay clear or not. To me I'd say yes, to someone that's struggling for work or doesn't give a toss about IR35 it's no take it.

Question is.... Are you comfortable taking a gig that's inside IR35? If you are, are you going to run your accounts properly or are you going to take a gamble and hope you never get found out. What's your level of risk and comfort.

You know the classification of the gig, you know the difference in cash to you in or out and you know IR35 gets investigated from time to time. What do you want to do?

[LondonManc]

Throwing the original clause around - what does it mean should it be invoked?

It's compensation to your company if they choose not to engage your company for certain deliverables. That sounds like good business sense that it should be in from your point of view, especially given that it mentions the statement of work. Most companies would be envious that you have a contract with such a clause. What percentage of expected fee would you get? Would a "subject to negotiation" clause help, or are you simply stating that you don't expect compensation because you're a contractor and receiving it is wrong. Sounds like good B2B practice rather than MoO.

[SueEllen]

Nope it doesn't fail the MOO test.

It means if they decide to walk you tomorrow as the project is cancelled it means the client has to pay you the notice period.

A client I had did this and it's happened to a few other contractors I know. However in most of our cases it wasn't explicitly stated in the contract.

The only reason it would be put in a contract is due to a past agency walking away with the fees and not giving the money to the contractor.

[fiddlesticks]

It's compensation to your company if they choose not to engage your company for certain deliverables. That sounds like good business sense that it should be in from your point of view, especially given that it mentions the statement of work. Most companies would be envious that you have a contract with such a clause. What percentage of expected fee would you get? Would a "subject to negotiation" clause help, or are you simply stating that you don't expect compensation because you're a contractor and receiving it is wrong. Sounds like good B2B practice rather than MoO.

This was my original view - that it's a consultancy-type contract, with a Statement of Work - but the contract reviewer doesn't agree.

The SoW states the notice period is 2 weeks; the contract is for 6 months working on a given project, rather than being a bunch of deliverables. So maybe it does sound more like a service contract.

[northernladuk]

Surely your reviewer told you exactly why it failed?

[SueEllen]

Surely your reviewer told you exactly why it failed?

The first post claims it fails MoO.

I would go back to the reviewer explain what the clause means and ask for some alternative wording.

[northernladuk]

The first post claims it fails MoO.

I would go back to the reviewer explain what the clause means and ask for some alternative wording.

I didn't read it as that. OP states it's clearly MoO which I didn't think was right. I thought that was OPs opinion.

[fiddlesticks]

The first post claims it fails MoO.

I would go back to the reviewer explain what the clause means and ask for some alternative wording.

The reviewer's gone back to the client to ask (essentially) why the client has refused to remove the part in bold, above. The client hasn't responded today.