What happens when you or your client are in a breach of contract?

A breach of contract is a situation that happens often in the business world – and in most cases it can be dealt with swiftly and without too much fuss. As a contractor you should learn how to recognise and handle a breach of contract in case it ever happens to you.

Contract breaches happen more often than you might think. A well-known example involved a contestant of the summer reality TV show Love Island breaking his contract with the ITV2 network. The star allegedly breached his contract by choosing to work with another network before the ITV2 show had ended.

In any industry, a breach of contract by a contractor or by a client can cause quite a bit of hassle. It’s wise to know how to approach a breach of contract scenario without tarnishing professional relationships with clients and agencies.

What is a breach of contract?

A breach of contract may occur when one or more of the parties involved in a contract do not honour the terms of the agreement. A breach can be either minor or major, and you should dictate your response accordingly.

A contract for services between a contractor and an end-client/agency will usually include these terms:

• The recognition of entering into a legal relationship
• The work you are contracted to do
• The agreed fee and terms of payment
• Notice periods/cancellation/termination terms and other considerations such as IR35

When might a client or agency breach a contract?

Typical examples of a breach of contract might include:

• Your client or agency does not pay you within the agreed payment terms
• Your client wrongfully terminates your contract against the cancellation terms (if any)
• The client makes demands outside the scope of your work without attempting to re-negotiate terms

Similarly, a breach of contract can occur if you do not fulfil the terms of your part of an agreement. This might occur if you walk away from a project before completing the contracted work (if there is no breach on their part).

Contract law can be complex, especially if you are trying to seek damages for a breach of contract. You should speak to a qualified professional such as a contract lawyer for advice on contract negotiating, mitigation or to seek damages for a breach of contract.

What to do if you suspect a breach of contract

If your client or agency has breached the terms of your contract, try to avoid the worst case scenario by speaking to the individual responsible. It’s possible that the issue can be rectified without legal action or ruining your relationship with the client or agency.

It may be the case that if there was a major breach, you could terminate the contract or even seek damages if the issue is not corrected. Before you consider taking this step, contact your client or write a letter outlining the issue and your desire to have the matter resolved.

Example: you are on a six-month contract, and your payment terms state you will be paid once per month; however you are still awaiting payment after three months. In this case you may be able to cease work until you are paid as the other party is not holding up their end of the agreement.

Each case is different, and your specific contract terms should serve as a guide to the actions you are able to take. It’s essential for you to read your contract thoroughly before signing so you are crystal clear on what is expected of you and your client.

Knowledge is key

Educating yourself is the most important thing you can do to avoid tricky scenarios, especially if you are new to contracting. Learn your contract inside out so you can always recognise if something is wrong. Don’t take drastic measures in the first instance – always try to maintain a good relationship with your client or agency. This is key if you want the opportunity to be contracted by them again in the future.

If you have questions on what to do with payment issues with your agency or client, visit our blog ‘Unpaid invoices and late payments’.