What to do if a client cancels a contract

When making the move to contracting, most are likely to find out though research that becoming a contractor does come with a lot of benefits, that a permanent employee wouldn't receive.

This is the basis of why contracts are created between contractor and client; in order to have clear boundaries and expectations from each party. Both agree to it's terms and conditions before work is to be started.

When agreeing upon a contract, even if it's one written by yourself, make sure that you have checked and amended any changes that you need to before you sign the contract and send it to the agency or client.

Once sent, ensure that the contract is signed by both parties, making clear your start and end date before starting any work.

Ensuring that your contract has been checked for IR35 and signed by both yourself and the client, you are aiding in the case where a client may cancel a contract. However, if they do cancel a contract for any reason, here's a guide of what actions you can take.

What steps to take if a client cancels your contract

What can do you if a client has cancelled a contract then?

Due to the nature of contracting, it does come with an array of benefits such as being your own boss and deciding when, where and how you work but a notice period is not one of them. Although if you wish, notice rights can be included within the contract. If you have chosen to find your contract through a recruitment agency, then they can help with drafting up a contract and making sure that a notice period is included.

On some occasions, the contract may not have been signed or provided at all and in this instance if you have already started the work for the client and can provide evidence through timesheets, emails and meeting notes, then English Contract Law may apply.

English Contract Law is in essence, a law which adheres to the simple principal that you should only be bound when you have given your informed and true consent to a contract.

Contractor rights

As a contractor you have very few employment rights, bearing in mind that you aren’t a permanent employee, you do however receive a different batch of benefits such as choosing when, where and how you work and being your own boss.

However if you’re still unsure, here are some rights you do have as a contractor. 

  • You are entitled to be paid for the work you have done and claim for any expenses occurred [ only if outside of IR35]
  • You are entitled to a safe and healthy work environment
  • You should not be discriminated in the workplace (on site contract)
  • When working through an agency, the contractor has rights under the Conduct of Employment Agencies and Employment Business Regulations 2003.
  •  If you are operating through a Limited Company but not via an agency, then it is up to you to provide yourself with workers right as you are employed by your Limited Company, not your client.

Breaching the contract

If a client has cancelled the contract in a way which does not adhere to it’s termination terms and conditions, then the client is in effect, breaching the contract. If this is the case then legal action could be taken, however this could be a more complicated route than first expected, so think it over. Don’t forget that you yourself, are also liable for breaching the contract on your end as well.

A breach can occur when either party do not meet the terms and conditions of the contract, although there are two different kinds of contract breach, which are as follows.

Minor Breach – a minor breach is a small mistake which can be rectified when discussed between contractor and client. Ensure that if this ever happens to make a real effort at correcting the mistake before perusing for damages.

Major Breach – if the contract has been breached in a major way, you have the right to terminate immediately, although it may not be the best option from a business point of view.

For contractors, typical contract breaches include something along the lines of the following:

  • Non payment or late payment
  • Termination without enough notice
  • Accused of a contract breach on your side in order to justify early termination
  • Cancellation of contract before work begins
  • Client refusal of signing a time sheet after work has been completed
  • Failure to provide any materials or conditions which were stated in the contract
  • Demanding additional services which were not included in the contract

Getting the right advice

Before reaching out to the more serious route of legal action, try talking to the person in charge or responsible for the breach, as legal action can be not only expensive but time consuming, and the results of a court case can never be predicted.

If the informal route isn’t working, then a more formal one will have to be taken. Begin by informing the client or the agent with a registered letter that you feel there has been a breach in the contract and that you are seeking damages and termination of the contract if the action/s are not corrected.

If a situation was to worsen with a client, your next instinctive step would be to hire a lawyer, although this can be very costly. Of course in serious matters you will need some professional advice but may not want to spend a fortune.

In this instance, you could hire a lawyer for a few hours to discuss the matter and what the potential implications could be, as well as what you could do going forward. However, this action should be seen as a last resort – the better option here is to first of all try to prevent a breach of contract in the first place by making sure the contract is right.

Contracting does have its advantages and disadvantages, but it can also be very rewarding, so if a client does cancel a contract there are steps you can take to ensure you are as protected as possible – but don’t forget there will be another contract around the corner.

If you feel that contracting is the right path for you, then you can speak to one of our advisors; newbusiness@sjdaccountancy.com or if you have any questions please call our new business team on 01442 330822.

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SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

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