Invalid Contract ?

[NetContractor]

I am currently in a contract. It finishes soon, and was sourced through an agency.

I was not given the option of opting in or out of the Agency regulations, although as I operate outside of IR35 I generally opt out as a rule.

Part of the terms of the contract were that I would invoice weekly, and the agency would pay the invoice within 30 days terms. I have submitted my invoices in accordance with the contract, and the first invoice is now overdue.

The contract stipulates a 6 month restrictive covenant. However, has the agency now voided the contract by now paying invoices within the agreed terms? I am angry that the agency has failed to uphold the contract terms and now owes me 6 weeks pay. I would like to cut them out if I can legally do so, and get paid directly by the client.

I am not looking for anyones moral opinion on this, but a basic legal understanding before I seek professional legal advice.

Thanks.

[Wanderer]

I was not given the option of opting in or out of the Agency regulations, although as I operate outside of IR35 I generally opt out as a rule.

The consensus here is that the agency regulations and opt out have no bearing on IR35. With no opt out signed you are by default opted in.

Part of the terms of the contract were that I would invoice weekly, and the agency would pay the invoice within 30 days terms. I have submitted my invoices in accordance with the contract, and the first invoice is now overdue.

The contract stipulates a 6 month restrictive covenant. However, has the agency now voided the contract by now paying invoices within the agreed terms? I am angry that the agency has failed to uphold the contract terms and now owes me 6 weeks pay. I would like to cut them out if I can legally do so, and get paid directly by the client.

The 6 month restraint of trade, this is not valid because you did not opt out of the agency regulations so it isn't enforceable.

But the first thing to do is to chase the agency up to see what's happened to your invoice. Generally it's a cock up on their part (especially on first invoices) rather than a conspiracy not to pay you but at the same time agencies don't seem to give a tulip if you get paid or not.

Once this is sorted out and if it proves to be the agency's fault then remind them of the Late Payment of Commercial Debts (Interest) Act 1998 and make it clear to them that you will enforce your rights if they fail to pay you on time.

[NetContractor]

THanks for the info...

...but my main question is still...Because they failed to pay this invoice on time, have the defaulted on the contract and therefore have no grounds to sue should I ask the client to pay me directly for future work?

[northernladuk]

Late payment won't be grounds for legal action, nor will it void the contract. I get what you mean that they have broken their end of the agreement but you won't stand a chance of legal action unless it is serious. Stuff is late, it happens, it is not grounds for breach of contract. If they never pay then maybe so but not so far.

[NetContractor]

I dont know about that. I would be interested to hear anyone elses opinion as well.

For example; if I have a credit card with 0% interest on Balance Transfers (for example), the contract stipulates that I must pay my bill on time. If I miss a payment or am late with a payment, then the credit card company will cancel my discount offer, because I have breached the contract.

[jmo21]

I dont know about that. I would be interested to hear anyone elses opinion as well.

For example; if I have a credit card with 0% interest on Balance Transfers (for example), the contract stipulates that I must pay my bill on time. If I miss a payment or am late with a payment, then the credit card company will cancel my discount offer, because I have breached the contract.

You signed a contract with the credit card company that stipulates that, I doubt you're contract with the agency says anything about them paying late.

[Wanderer]

Because they failed to pay this invoice on time, have the defaulted on the contract and therefore have no grounds to sue should I ask the client to pay me directly for future work?

Let's keep this in perspective. Just because you miss a mortgage payment doesn't mean that the lender is going to repossess your house.

If you want to go direct with the client then as far as I can see there is no valid restraint of trade clause in your contract to prevent this because you didn't opt out. However, you need to talk to the client about going direct because ultimately the client are the ones to decide if they will allow it or not. It may surprise you but a lot of clients don't want their contractors to go direct.

Also, I'd recommend that you don't open the discussion by bitching to the client about how crap the agency are. Talk to them about going direct and find out how much they are paying the agency. It may be that they can make a big saving by cutting out the middle man.

And the other thing to remember is that if you go direct then you probably aren't going to get paid weekly and they will most likely take 6 weeks or more to pay you. On top of that, their procurement department will generally screw things up too.

[SueEllen]

THanks for the info...

...but my main question is still...Because they failed to pay this invoice on time, have the defaulted on the contract and therefore have no grounds to sue should I ask the client to pay me directly for future work?

Contract law for businesses doesn't work like that.

If one clause is invalidated it doesn't mean the entire contract is and even if the contract gets to a point where there is a breakdown, there is normally a period of 7-14 days where both parties have to try and resolve the issues.

(I've had many discussions with a good friend of mine who is a lawyer but I also know other lawyers, barristers, a magistrate and a judge. )

If the agency is late paying you then the your first port of call is the payontime website Wanderer directed you to, to read up on all the legislation.

You need to act reasonably in chasing a debt in the first instance.


So first of all you contact the agency informally i.e. phone them to see why they have paid you late. In my own experience 95% of the agencies and direct clients will pay you immediately once you have spoken to them or emailed them on an informal basis.

Then if you don't receive payment within 3 working days (3 working days because it depends on how fast your bank deals with payments) you need to take more strict action depending on the solvency of the agency.

If the agent are solvent then send them a recorded sign-for letter stating that the invoice is overdue and they need to pay within 14 days before taking further action.

After 14 days in your case 2 invoices would be overdue so you are in your rights to down tools and inform the client both verbally and in writing that until the agency pay you unfortunately you can't continue working.

However how you handle it, it's up to you. Personally if I know that the agency has no money troubles by doing a proper search not just a credit check I would work longer before downing tools.

[SueEllen]

You signed a contract with the credit card company that stipulates that, I doubt you're contract with the agency says anything about them paying late.

Agreed.

Plus business to consumer law is different to business to business law.

Plus the law on financial products tends to be different from the law on other things.

[NetContractor]

OK. So lets assume I have "opted in" to the agency regulations.

How does that affect me in terms of the restrictive covenant?