Working without a contract

**TheCyclingProgrammer** · 24 February 2014, 12:32

Originally posted by DaveHills View Post

Could John and his company be held liable for breech of contract between Company A and Company B?

IANAL but I wouldn't have though to as he has no contract with Company B.

However he could be in breach of his implied contract with Company A - you say he has no written contract but I assume there is documentary evidence (emails) of the work he has agreed to do for Company A, payment terms and his agreement to complete work over the deadline at no extra charge. This is enough to imply a contract IMO.

"John" should chalk this up to a potentially very expensive lesson in why you should never work without a contract and for allowing himself to be put in a position where he is owed a 5 figure sum.

Taking on new work while trying to finish the work for Company A free of charge can only end in disaster IMO. He already sounds pretty burnt out and this is only going to make it worse. He should try and delay the start of the contract with Company C if he can and make sure he finishes the work for Company A, ideally within the deadline. And in the future, not agree to such unrealistic demands.

**Murder1** · 24 February 2014, 13:39

"John" needs to get some legal advice IMO but I'm pretty sure he can't be liable for any contractual obligations between Company A and B - he's liable for those between his own Ltd and Company A however but then without a written contract he's into the realms of implied contracts and as such he needs professional advice not forum advice.

I can't however get my head around how he can agree to deliver a fixed piece of work by a given deadline but then invoice per hour. Is he working per hour or on a fixed price piece of work? There's potential that even though he's agreed to deliver work by a given deadline that because he invoices per hour he's able to recoup some/all of the £20k even if he walks but a legal bod will be able to advise.

**northernladuk** · 24 February 2014, 13:44

Originally posted by DaveHills View Post

I have a friend whose name is John who has, through his own limited company, been working for a company (company A) without a contract (company A is another 1 man band).

We know it is going to go tits up just from this line alone.

The work for Company A is for a contract they have to deliver to Company B. This has now been going on for 10 months.

Company A has a contract with Company B yes?

John has been working very hard (long days, often 7 days per week, for the last 10 months) and is shattered but is trying to deliver enough so that Company A can meet their contractual obligations, which is much overdue.

And what is the payment agreement for these long hours? He has somewhere in an email what his daily rate will be and a log of all the time spent? ... or has he just done this on word of mouth in an adhoc method? What documentation does he have to evidence all this?

Company A has said to company B that if the work overruns the next deadline then any further work will be completed free-of-charge. John reluctantly agreed as he is close to completion and under pressure. John is owed in the region of 20k but is trying to draw this to a amicable conclusion for professionalism, however, has the opportunity for a contract back with another company (C).

That is very good of Company A but what does that have to do with John. He has no relation to Company B at all. He delivers to Company A who have to pay him as they have or agreed to do. What Company A gives away has no bearing on John. You have to be very clear with the relationships.

How on earth did John let it grow to 20k. What are the chances of him actually seeing this? Is company A a decent bloke or is he just going to shut the LTD leaving John in the lurch?

While John realizes this situation has got out of control,

That is an understatement and a half

he doesn't intend to leave Company A in trouble,

He is a better man than me in that situation

he does have to think about his own future

About bloody time IMO

and has a very good reputation at company C where he wants to work. His plan would therefore be; if the work overruns to finish it off outside of the work for Company C which is not ideal but what he feels is right. Otherwise he stands to loose a good contract and keep chasing a cluster-fk of a project.

Is he going to get paid for doing this work out of time? If so it's not a bad option and good for IR35. If it is for free then tell them to **** right off!!

For the payments that he has received, John has invoiced for design work by the hour to Company A.

So with that can of worms open....

Could John and his company be held liable for breech of contract between Company A and Company B?

Breach of what? There is no contract. The only implied contract you could argue here is that John turns up, works and Company A pays him by the hour. It would appear to me that if anyone is in breach here it is Company A if they haven't paid him in a reasonable timescale. John would be failing in his duties as director to even continue working on this pile of poo so I can't see how anyone could hold it against him for leaving. He isn't getting paid for extra work that he has no control of. It's just ridiculous.

What might be a problem is if there are email chains about what John has agreed to deliver... but again it appears he hasn't been paid so not unreasonable to withdraw services if there is no payment.

Normally we would say forget it because it won't go legal. People can't be arsed going through the courts chasing loses that aren't really there but it Company B do sue Company A for a large wad Company A may not have any other choice to try recoup loses from John but a horribly messy and potentially very expense situation to try prove. I can't believe for one minute Company A would try this or succeed.

If I was John I would have a solicitor on to Company A for unpaid bills + interest and be knocking on Company C's door as quickly as possible. Very admirable for him to do the right thing but he needs to learn when enough is enough.

**DirtyDog** · 24 February 2014, 14:07

Originally posted by DaveHills View Post

Could John and his company be held liable for breech of contract between Company A and Company B?

No. John isn't party to the contract between A and B, therefore cannot be sued for breach of contract between A and B.

John could be sued for breach of contract between him and A, though, since there is an implied contract between the two parties. However, it would be difficult to prove exactly what terms of the implied contract have been breached. It would be for A to show that

a contract exists between A and John
the contract between the two parties has been breached by John's actions
the breach of contract has resulted in a loss to company A

I'd guess that it just wouldn't be worth their while, to be honest, to try and prove that - however, I'd think that John might be lucky to get everything that is owed to him.

John is a fool.

**DirtyDog** · 24 February 2014, 14:10

Originally posted by northernladuk View Post

Is he going to get paid for doing this work out of time? If so it's not a bad option and good for IR35. If it is for free then tell them to **** right off!!

I'd disagree with that - if he is being paid to fix things that he did wrong, then that is typical of an employee relationship; if he isn't being paid to fix his mistakes then that's a B2B contract.

That assumes that the delays can be put down to his mistakes, of course.

**TheCyclingProgrammer** · 24 February 2014, 14:14

Originally misread OP and thought that the agreement to work for free past the deadline was just between John and Company A. As NLUK said, what Company A has agreed with Company B isn't John's problem. Unless he is directly responsible for the project over running, why on earth would he agree to providing his services free of charge?

John should heed all of the above advice and get legal help. It depends on what was agreed but he might not be obliged to continue providing any services if he is owed money.

His priority IMO would be to get paid and then work from there. He says he doesn't want to leave Company A in the lurch but if he hasn't paid, why should he care? Payment first, goodwill later!

**DaveHills** · 24 February 2014, 14:24

Originally posted by Murder1 View Post

"John" needs to get some legal advice IMO but I'm pretty sure he can't be liable for any contractual obligations between Company A and B - he's liable for those between his own Ltd and Company A however but then without a written contract he's into the realms of implied contracts and as such he needs professional advice not forum advice.

I can't however get my head around how he can agree to deliver a fixed piece of work by a given deadline but then invoice per hour. Is he working per hour or on a fixed price piece of work? There's potential that even though he's agreed to deliver work by a given deadline that because he invoices per hour he's able to recoup some/all of the £20k even if he walks but a legal bod will be able to advise.

John is paid by the hour for the work. All hours and what he has done are tracked. At the beginning of the contract, Company A agreed the work with Company B on a timescale to secure i.e. an unrealistic one. John said that they would be lucky to get it done in that time frame (why John didn't see all this coming from that point I don't know).

Whilst he sees your point, for years John has been working two jobs and its one of the reasons why he decided to go contracting. The hours are not much a concern, its just the level of stress associated with the work which is beginning to affect health. Company C work is also 4 days per week so there is time for follow up work i.e. any updates and bug fixes (obviously not more work though!!!) and it should get him out of a sticky situation with references (while nothing has been said, he assumes that it would be along the lines of 'good work but takes ages').

Originally posted by northernladuk View Post

We know it is going to go tits up just from this line alone.

Company A has a contract with Company B yes?

And what is the payment agreement for these long hours? He has somewhere in an email what his daily rate will be and a log of all the time spent? ... or has he just done this on word of mouth in an adhoc method? What documentation does he have to evidence all this?

That is very good of Company A but what does that have to do with John. He has no relation to Company B at all. He delivers to Company A who have to pay him as they have or agreed to do. What Company A gives away has no bearing on John. You have to be very clear with the relationships.

How on earth did John let it grow to 20k. What are the chances of him actually seeing this? Is company A a decent bloke or is he just going to shut the LTD leaving John in the lurch?

That is an understatement and a half

He is a better man than me in that situation

About bloody time IMO

Is he going to get paid for doing this work out of time? If so it's not a bad option and good for IR35. If it is for free then tell them to **** right off!!

Breach of what? There is no contract. The only implied contract you could argue here is that John turns up, works and Company A pays him by the hour. It would appear to me that if anyone is in breach here it is Company A if they haven't paid him in a reasonable timescale. John would be failing in his duties as director to even continue working on this pile of poo so I can't see how anyone could hold it against him for leaving. He isn't getting paid for extra work that he has no control of. It's just ridiculous.

What might be a problem is if there are email chains about what John has agreed to deliver... but again it appears he hasn't been paid so not unreasonable to withdraw services if there is no payment.

Normally we would say forget it because it won't go legal. People can't be arsed going through the courts chasing loses that aren't really there but it Company B do sue Company A for a large wad Company A may not have any other choice to try recoup loses from John but a horribly messy and potentially very expense situation to try prove. I can't believe for one minute Company A would try this or succeed.

If I was John I would have a solicitor on to Company A for unpaid bills + interest and be knocking on Company C's door as quickly as possible. Very admirable for him to do the right thing but he needs to learn when enough is enough.

Firstly, John has received 55k thus far so has been paid to end Nov. There is a real product although the software is incomplete. Due to the level of stress being so high now, its not a concern if any more is received and he wont chase it. He just wants to move on with as little collateral damage as possible and NEVER repeat these mistakes again!!!

Company A does have a contract to deliver a product to Company B.
John has no written contract. Emails do indicate that John was around from the beginning and that he would work designing the product. Company A is responsible for managing the project, interfacing with the customer and has the contractual obligations.

The invoices outstanding amount to 20k just because of the number of hours worked. Last paid invoice was for December.

If John was being fair, he would admit certain failings but Company A are just not managing the project and John doesnt feel its his duty, nor does he have the time! I.e. getting extra people to spread the load...etc.

Thanks for the advice guys

**Murder1** · 24 February 2014, 14:51

Originally posted by DaveHills View Post

Thanks for the advice guys

John should really thank us, the advice is for him

**northernladuk** · 24 February 2014, 14:57

Originally posted by DirtyDog View Post

I'd disagree with that - if he is being paid to fix things that he did wrong, then that is typical of an employee relationship; if he isn't being paid to fix his mistakes then that's a B2B contract.

That assumes that the delays can be put down to his mistakes, of course.

I don't see any indication whatsoever this is due to Johns mistakes. The fact it mentions him working all the hours gods sends would indicate it's just late due to timescales not issues of work quality.

A later post from the OP indicates this as well.

If it was due to mistakes then yes I would agree but I am sure this isn't the case.

Working without a contract