Knowledge

What are your rights if a client cancels your contract?

Posted on Feb 16th, 2018 | Contracts

What are your rights if a client cancels your contract?, image of businessman taking notes

Freelancers and contractors will generally have no legal right to reinstatement if their Client terminates or chooses not to renew their contract.

However, you may be due a paid notice period from your client if they end the contract early, or a sum of money may be owed to you on early termination as compensation (often referred to in freelancing circles as a kill fee).

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Contracts & agreements

A contract is any agreement with two or more parties; this agreement can be written (on paper or email), oral, implied or a combination of these. If you’re working on the project or assignment, a written contract will usually still be binding even if you haven’t signed it (as you’ve ‘accepted’ the terms of the agreement by beginning work).

Some freelancers and employers don’t like a written contract of any description, but we would recommend it to ensure both parties are clear about what has been agreed and to minimise the risk of confusion or dispute later. If you don’t have a written contract, it can be more complicated to enforce the rights contained within the agreement.

Main elements of a contract

The main elements of a valid contract for services (that the self-employed have) are:

  • The intention to enter into legal relations
  • The offer (of work) and its acceptance (an agreement)
  • Consideration (e.g. in return for doing work/providing a service the ‘worker’ receives payment).

The contract is the main legal document but it can be supported by other documents that are referred to in it. These include:

  • The proposal – the client’s requirements and the action you’ll take to deliver the work
  • The schedule – the agreed start and delivery dates and any progress points in between
  • You may have standard Terms and Conditions under which you operate e.g. cancellation terms, copyright ownership issues.

Notice periods

Assuming you’re a genuine freelancer/contractor (see our guide to determining your employment status here) and not a worker or employee, there are no legal minimum notice periods you or your client need to provide each other to terminate the contract early, or at its natural end.

If you have notice rights, these should be written down in any agreement between yourself and the client (including third parties, e.g. Recruitment Agencies).

The contract should clearly set out the ways in which termination will be handled and, ideally, should allow either party to terminate the agreement immediately or with notice, whether a breach of contract has occurred or not.

With regard to notice periods, if you have a written agreement, check to see if there are any written termination and notice clauses for either you or the client to give each other included in it.

If there are written termination clauses, what do they cover? Common clauses that allow a client to terminate the contract include misconduct on your part if you’re unable to fulfill the work, if you breach any terms of the contract, if they’re unhappy with your work, or if you fail to meet deadlines. There may be a ‘for any reason’ clause that allows both you and the client to end the agreement for any reason at any time (with or without notice).

Sometimes, there may be a provision for some level of financial compensation if the agreement is terminated early by the client. For example, where you’re not at fault but the contract has to end for other reasons (this could be a percentage of the total fee that would’ve been due over the total contract period).

Some industries have, as common clauses, “cancellation rights” that allow the contractor to be paid a sum if the agreement is cancelled at short notice by the client before it starts (but these must be agreed between both parties to the contract).

Unfair Dismissal Rights

As a genuine freelancer, you’re unlikely to have Unfair Dismissal rights. The rights you do have as a freelancer/contractor include:

  • You shouldn’t be discriminated against in the workplace, and if you are, you can make a claim to an Employment Tribunal. This protection only applies to those described as ‘contract workers’, contracted personally to do the work (i.e. you can only claim discrimination if you do the work yourself)
  • You’re entitled to a safe and healthy working environment (as above) – see www.hse.gov.uk
  • You should be paid for the work that you’ve done and receive any expenses you’ve incurred and are due
  • If you’re paid late, you have the right to add interest to your outstanding payments under the Late Payment Regulations
  • You may also be entitled to Statutory Maternity Allowance if you’re pregnant and have recently left an engagement
  • Contractors working through Employment Agencies also have rights under The Conduct of Employment Agencies and Employment Business Regulations 2003 – see our guide here
  • On the occasions that you’re classed as a ‘worker’ (for employment rights) but self-employed (for tax purposes), you may be entitled to workers rights if you perform the work personally (e.g. in certain circumstances freelancers can be classed as ‘workers’ and receive paid holiday and are entitled to rest breaks under the Working Time Regulations)
  • If you’re registered as a limited company and provide your services on a freelance basis to a client organisation (as a provider), you’ll not receive workers rights from this organisation – it’s up to you to provide yourself with workers rights as you’re employed by your own limited company.

Breach of Contract

If your contract has been ended in a way the agreement doesn’t allow, your client may be in breach of contract and you may be able to sue for damages. This area of the law is complicated and you’d need to take advice from a professional to understand whether you can make a claim. There are also different categories of damages for those making or defending a claim for breach of contract.

You also could be in breach of contract if you don’t fulfil the terms of the contract.

If you’re an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk – a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.

Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.

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Written by Lesley Furber

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