Employment contracts

Employment contracts

QUESTION: My employment contract says that I must give three months’ notice and yet I have a better job offer that requires me to start next month. I have been told that as I haven’t signed my employment contract, I can ignore it. Is this right?

The short answer is no, you cannot ignore it. A court or a tribunal is almost certainly going to find that a contract does exist and that you are bound by it. There may be some damaging repercussions for you if you just walk out.

Firstly, let us consider what is a contract?

In English law the definition of a contract is a legally binding agreement. It does not have to be written at all, let alone signed.  A contract is in place where there has been:

1) An offer.
2) An acceptance of that offer.
3) Consideration – this is usually money but can be something of value.
4) An intention to create legal relations.

Let us look at this in simple terms:

1) I offer to sell you my lovely electric BMW i3 in the pub one night for £5,000.
2) You accept my offer.
3) Nothing is written down.
4) Does a contract exist?

Well, there is certainly an offer, and that is me offering to sell you my car for £5,000.

And there is an acceptance, you have agreed to buy it.

There is definitely consideration, the £5000.

Is there an intention to create legal relations?

This is where it is open to interpretation. If you are my buddy and we’ve just finished our 6th pint of strong lager, almost certainly the final component “intention to create legal relations” is not there. This is a social context and the final component does not exist. 

However, what if I have advertised my car for sale and you had met me in the pub for the first time for the specific purpose of buying my car? I offer to sell it to you for £5,000 and you accept.

Clearly, the purpose of the meeting was to do a deal. Therefore, the intention to create legal relations is there and the contract is binding. So what happens if I change my mind? You could enforce your right to buy my car in the courts, or I can force you to buy it in the courts. It doesn’t matter that there was only a handshake on the deal.

The reason people do tend to write down contracts is for the purpose of proof.  What if you and I were sitting in a quiet corner of the pub when this agreement was reached. How do I prove we had that agreement? This would be simply resolved by what a judge believes. If your friend the magistrate or some other distinguished person was present, that may be sufficient proof.

In an employment situation, it is very straight forward.

The offer: Usually a letter, but can be verbal. Do you want to come and work for us for £40,000 per year?

The acceptance: Is not when you sign the letter but when you turn up for work. Having turned up for work, you have accepted that contract.

Consideration: You have accepted payment for your work.

Intention to create legal relations: All employment arrangements must be an intention to create legal relations.

In this case, your employer has offered you a job in which there is an expressed term that you must give the employer three months’ notice. By turning up for work and being paid, you have accepted that contract and all its terms. Only if you had specifically rejected that term could you argue that you are not bound by its effect.

For example, if you had written to them accepting the contract as a whole but rejecting that part, it would no longer be effective unless the employer expressly rejects your amendment.

So, what would happen then if you just walked out?

You would be in breach of your contract.  Your employer could sue you in the courts for payment in lieu of notice (yes, it works both ways) or worse still, if they suffer a loss as a result of your premature departure, they could sue you for damages. In practice, this rarely happens at more junior levels, but if you are more senior, say at director level, this could be very expensive for you. In either case, your reputation will be damaged and you may get a bad reference (see article on References).

Advice: If you are faced with this situation, the only sensible course is to negotiate with both your current and new employers. Employers can often be angry when a good team member gives notice, especially if you’re going to a competitor. Give it a day or so and then approach them again. In my experience is it very rare for an employer to dig their heals in, and often there is an tri-partite agreement where perhaps you return to the old employer for a key function/meeting. Be careful though. If your employer requires you to stay until the end of your notice, you will have to stay or suffer the consequences.


Tash Kitsis

Wednesday, 1 February 2023 at 1:41pm

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