Early termination of the contract by client

[Old Greg]

The problem is that most contractors don't have the legal clauses in the contract they require to ensure they're compensated if the contract is terminated early. When I worked for a small company that offered services there was always a clause outlining the amount of compensation to be paid in the event of the termination of the contract.

If you don't have that clause in legal action gets complicated, especially when you have clauses in about only being paid for work actually carried out for the client.

The tricky bit for contractors is that the client can give the agreed notice to terminate the contract and then say there is no work available during the notice period. The contractor would then need a clause stating that a defined number of days work with be required and paid for each month etc.

[malvolio]

The tricky bit for contractors is that the client can give the agreed notice to terminate the contract and then say there is no work available during the notice period. The contractor would then need a clause stating that a defined number of days work with be required and paid for each month etc.

Which blows any clauses about mutuality and puts you well inside IR35 territory...

FFS people, you dont want a notice period and it will not be honoured anyway. That will become even more important next year

[wattaj]

FFS people, you dont want a notice period and it will not be honoured anyway. That will become even more important next year

Agreed.

I have always requested that contracts only provide for me giving the client notice; they can get rid of me whenever they like: 0 days notice.

Sometime the agent wont accept that as it is inconsistent with the upper contract, but at least I try.

[NotAllThere]

The contractor would then need a clause stating that a defined number of days work with be required and paid for each month etc.

What about something like:

"Unless otherwise negotiated, in the event of the client no longer requiring the contractor's services before the stated end of the contract, compensation to the amount of 5 days' fees will be payable".

[malvolio]

What about something like:

"Unless otherwise negotiated, in the event of the client no longer requiring the contractor's services before the stated end of the contract, compensation to the amount of 5 days' fees will be payable".

...so setting the expectation that you will be paid when there is no (more) work to be done....

Can you see the flaw in that approach? Apart from it making no sense business-wise, especially from the client side, it destroys the minimum level of mutuality argument.


Like I said several times already - learn to think and behave like a business or resign yourself to working inside IR35. It's really that simple.

[NotAllThere]

...so setting the expectation that you will be paid when there is no (more) work to be done....

Tested it in court yet?

Maybe it would fall foul of IR35, maybe not. A clause such as I suggests of course sets an expectation to be paid if there is no more work to be done. That's what it is for. In most contracts for x-months length, there is an expectation on all sides (assuming good faith!) that there will be x-months work. I.e. that work will not run out during the course of the contract. The clause defines what will happen if that expectation is not met.

It doesn't go against MOO. MOO is the obligation to provide work, and the obligation to do work provided. If the clause is invoked, no work is done. Just a small sum in return for terminating early.

As a client, I wouldn't want such a clause, obviously. From the contractor point of view (falling foul of IR35 notwithstanding), it makes good business sense as it provides some protection. What happens then is what happens whenever two parties have different interests. They negotiate and hopefully come to a compromise.

Perhaps the wording would need varying, but I don't think such a clause is immediately and blindingly obviously a non-starter.

[BlasterBates]

A clause in the contract that stipulates compensation in the event of early termination is perfectly normal between businesses and is therefore not a pointer inside IR35. It is no different to a hotel charging a guest for a room who cancels at the last minute.

[northernladuk]

This. A fixed agreement for a sum paid in an eventuality is fine. Expecting payment against the T&M terms when it wasn't worked isn't.

But good luck getting anything like that in one of our contracts.

[PerfectStorm]

Put it this way, at least you're probably outside IR35 now

[PerfectStorm]

Now I see what people are saying but imagine if it was the other way around.

We get people on here moaning when contractors give notice anyway. Imagine, as a contractor, strolling into client and saying "Im not giving notice I'm off at the end of the day".

Client would be mega wassed off.... Agent would blow his lid as well I expect if it meant they lost a months worth of their margin.

Yes I know the relationship is different but I still thinks its a bit tight when clients do this. OK they're situation has changed but, come on, play fair and just give notice.

If it was we, even though you might not get anywhere, I'd be pushing for that months notice. Whats there to lose? It'd be a good laugh if nothing else.

I've only known of contractors be criminally bad to not be given their notice period to work out.

Usually it's the contractor asking to go a bit quicker, not the client.