Imagine this: you have a client. As their contract comes to an end you discuss extending it. The contract expires. You've almost agreed terms for continuing the service, but neither party has signed the contract. They're a good client, so you continue providing the service anyway.
Then suddenly, 2 months after the expiry of the first contract, a dispute arises and your client ends the relationship. They pay you a small amount for the 2 months' work, but you think you're entitled to much more under the contract.
Was there a contract?
There's no absolute rule that contracts have to be written, let alone signed. Moreover, in the modern age, signing doesn't necessarily have to take the traditional form – you could use an electronic signature system.
However, a recent case with similarities to the above scenario shows that sometimes a lack of signature suggests lack of intent to be bound by the contract. Meaning the courts won't enforce it.
The claim was brought against a sportswear manufacturer by a company that held the rights to exploit the commercial activities of Marouane Fellaini, the Belgium and Manchester United footballer. The facts of the case were not completely summarised in the judgment, but Fellaini wore boots made by the manufacturer and the parties were in negotiations about the extension of the contract. At some point, the manufacturer decided to end the relationship. It appears Fellaini had initially complained about the construction of the boots. In any event, the company sued the manufacturer for not making payments. Because the parties hadn't yet agreed a contract extension, at the relevant time there was no signed contract in force.
The High Court said that in the commercial context, especially with big businesses supported by legal teams, a signature is often expected. Without those signatures the courts may decide there is no evidence to suggest that the parties intended to be bound by the contract. For that reason the court dismissed the claim and the manufacturer didn't have to make the claimed payments.
What this means for you
You should always make your intentions clear.
If you and the other party don't sign a finalised contract it's hard to know whether or not the court would enforce it. This example involved two big companies that had legal advice – this influenced the court's decision. That doesn't mean, however, that a small business isn't expected to sign contracts – especially if the evidence shows you've got a track record of signing. You also don't know whether you'll be in the position of wanting the court to enforce the contract or wanting to avoid its consequences.
So it's best to make it clear when a contract is finalised by signing it, and to be careful about acting on contracts that aren't signed.
How we can help
We have numerous contracts covering all sorts of matters that you can use to clarify your business agreements. For example, we have an Agency agreement, Consultancy agreement and a Partnership agreement.
You're negotiating a contract with a business client. One of your directors suggests the following terms:
Moreover, this director is against bringing these terms to the client's attention in the hope that they don't notice them.
Is this advisable? Would the clauses be effective in court?
In brief, this depends on whether a court would decide that the clauses are fair. The Court of Appeal (CA) considered this topic twice recently: 'Case 1' focused on a clause similar to the first one above, excluding liability for negligence; 'Case 2' focused on a clause like the second, a non-reliance clause. The first clause was found to be fair and enforceable; the second was unfair and so wasn't enforced.
Whether the clauses are enforced depends on the context, but there are a few principles to remember if you're considering such clauses.
What this means for you
Exclusion and non-reliance clauses are common in commercial contracts and there is no reason to avoid them. However, there is always a risk that a court will not enforce the clause, especially if it's particularly broad in scope or there is unequal bargaining power.
Note, also, that you're more limited when it comes to exclusions from consumer contracts.
How we can help
We have numerous contracts that make use of exclusion clauses. For example, our Short and Medium-term leases for commercial premises both include clauses saying that the parties haven't relied on representations except (carving out) those given in response to written enquiries. Our Agreement for the supply of goods (non-retail) includes clauses limiting liability and non-reliance clauses with no carve-out.
Most of your business is conducted during normal office hours, but a certain service that you provide requires workers being 'on-call' at night. They're allowed to sleep, as long as their phones ring loudly enough to wake them. Must workers be paid the minimum wage whilst sleeping?
The most obvious example of this is with care workers, who are needed at night and must be prepared to work, but often won't actually be needed at that time, and the sector is dangerously short of money so there are many workers working at the minimum wage. The matter isn't limited to the care-sector, however: case-law has also involved a night-watchman at the premises of a construction company and a worker responsible for security for business premises. Or, maybe you employ people to take calls at night, and so need them on-call in case the phone rings, but people rarely call at night so the worker can get a decent night's rest.
The legislation on this is not clearly drafted and case-law from the Employment Appeal Tribunal displays tension between different interpretations of the law. Sometimes, workers who were expected to sleep for their shift were considered to be working and therefore entitled to minimum wage; other workers in that situation were considered only to be available for work.
A recent Court of Appeal judgment has reviewed the case-law and simplified the answer: if a worker must be available for work at a time when they're expected to sleep, they need only be paid the minimum wage for those times when they are actually working.
Unfortunately, the answer won't always be as simple. There will be cases when workers are expected to work but allowed to doze in quiet periods; that would be considered working and therefore they'd be entitled to minimum wage. But it won't always be clear where to draw the line between those cases and the case when they're sleeping and not working but available for work.
It is also understood that Unison is preparing to appeal this to the Supreme Court, so this might not be the final word on the matter.
What this means for you
You must pay your workers the statutory minimum wage. For workers of 25 or over who are not apprentices, that's £7.83/hour (which increases each April). But if the worker is expected to sleep when they're available for work, you can negotiate a reasonable payment that might be less than the minimum wage.