Contractors' Questions: Agency withdraws contract offer where do I stand?

Contractor's Question:



I had been put forward for a contract through an agency, had an interview, and 3 hours later got offered the contract by the agency and I accepted. Then I received an email with a Credit Check Authorisation form, stating if it came that there were any defaults (satisfied or not) over £500 on my history the offer would be rejected.



This was not explained when I went for the contract, nor when the offer was made. I know that my credit rating is poor, almost 2 years ago I got stuffed when I was freelancing, bought a few servers for a contract, the company that I was working for went bust, and I almost went bust too, but I have recovered and paid off the debt, however there is a default on my file from then for over £500, so it is likely this contract will get withdrawn.



Anyone know where I stand on this, and what rights I have?



First time I have ever had to go for a credit check and been in contracting for over 10 years.



Further details:



I am using a Limited company of my own for contracting and had not signed any Opt-Out forms for this contract.



They have since re-advertised the position.



I had the interview over the telephone last Wednesday at 2pm, at 4.30 my contact at the agency rang and offered me the position, said the client was very happy with my skillset and the paperwork would be emailed to me by the agency. Thursday I received the email with the Credit Check Authorisation form, I rang my contact at the agency and he stated on the phone that he didn't know. But has in later conversations apologised saying he should have told me before putting me forward for the contract.



I am very angry that this has happened, and cannot see why they have put a default limit of £500 to make you fail or pass, surely if someone has defaulted, the amount is irrelevant, a default is a default.



My contact at the agency has clearly stated there is nothing more he can do on this.



Answer:



It is a general principle of English law that contracts can be made by word of mouth or by conduct and do not have to be in writing. However in order for there to be a contract, the two parties must, as well as agreeing terms, show an intention to create a binding contract. Where the expectation of the parties is that a formal written contract will be signed, that will normally mean that what the parties say before the written contract is signed is "subject to contract" and not binding.



In the IT contracting sector it is almost invariably the case that both the agency and the contractor expect that after an oral agreement in principle, formal paperwork will be sent out for signature, and this will normally be taken to show that the parties did not intend their oral agreement to itself be a binding contract, so that if the formal contract is not in the end signed by both parties, there is no contract despite the earlier agreement in principle. (The situation may well be different if the contractor actually starts work before the paperwork is signed but that is not the case here.)



So unfortunately, your company will not be able to sue for breach of contract.



The next question is whether there has been a breach of the Conduct of Employment Agencies and Employment Businesses Regulations 2003. Regulation 18(d) requires contract agencies not to introduce a work-seeker (i.e. contractor) to a hirer (i.e. client) until the agency "has obtained sufficient information from the hirer to select a suitable work-seeker for the position which the hirer seeks to fill, including the following information... the experience, training, qualifications and any authorisation which the hirer considers are necessary... for a work-seeker to possess in order to work in the position".



It is possible that the requirement to pass a credit check would be a "qualification" within the meaning of this regulation because although "qualification" in the narrow sense can mean a certification by an independent body that particular levels or training and/or experience and/or competence have been attained, in its ordinary meaning it refers more widely to any quality which fits a person for a position, and the introductory words "sufficient information... to select a suitable work-seeker for the position which the hirer seeks to fill" would favour a broad interpretation. So the agency should have obtained the information that a credit check was necessary before introducing you to the client, and the person you were dealing with at the agency has since admitted that he did indeed know about this requirement before putting you forward.



Having obtained this information the agency is required by Regulation 19(b) not to put you forward without confirming that you have the necessary "qualifications" - i.e. that you would pass the credit check required by the client. This the agency failed to do.



Breach by the agency of Regulation 19 is an offence and you could report the agency to the Department of Trade and Industry. Prosecution by the DTI is, however, separate from the question of whether you are entitled to bring a civil claim for compensation against the agency.



In order to bring a civil claim you would need to be able to show that the agency's breach of the regulations had caused you (or your company) monetary loss. Unfortunately the fact that you have not secured this particular contract (and have therefore lost out on the profit that would have been made on the contract) cannot be said to have been caused by the agency's breach because from what you say it appears that if the agency had acted properly and informed you from the outset of the client's requirements you still would not have been able to secure this contract. So unless, for example, between the agency putting you forward and you later discovering that a credit check was required, you had turned down the offer of some other contract because you expected to be awarded this contract, or unless (to give another example) when attending the interview you were taking a few hours off from revenue generating work, it does not appear that the agency's breach has caused you monetary loss and consequently you will not be entitled to compensation in a civil claim against the agency.



In summary, unfortunately it does not appear, from the information available, that a legal claim by you for compensation for the shortcomings of the agency would be successful.



Answer kindly provided by John Antell



John Antell is a barrister who specialises in contractual disputes (particularly those involving IT and engineering) and in employment law in its widest sense (i.e. including the duties of agencies and clients towards contractors and other workers who are not employees, and the taxation of all types of worker).



Prior to coming to the Bar he worked in the IT industry for 19 years including 9 years as a contractor.



He is the author of Employment Status (published by Butterworths)



www.johnantell.co.uk



Copyright John Antell 2005





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