Express, Implied and Other Contract TermsThursday, March 8th, 2012
“Surely” we were asked on a recent Employment Law course “the terms of a contract are everything that is written down in the contract, nothing more, nothing less?” And to the surprise of many delegates we responded “No, that is quite incorrect”. And this is such an important point that we feel it worth explaining just what your contract of employment really does contain.
The law of contract was established centuries ago when most people, masters as well as their workers, could neither read nor write, and even today a contract need not be in writing in order to be valid and therefore legally enforceable. Nowadays statute law does require you to provide each employee with a statement of his or her terms and conditions of employment within the first month of employment, but this need not be in the form of a contract. Put another way – and yes, it may sound ridiculous – while you are not required to give your employees a written contract, you must give them a written note setting out what is in their unwritten contract.
In law a contract exists and is legally enforceable if it contains five elements:
- An offer: For example you offer employment to a candidate. Or somebody applies to you for a position.
- Acceptance: The other party accepts the offer. For example the candidate accepts your offer of employment. Or you agree to employ the candidate who wrote or applied to you. It doesn’t matter which way round these two elements are. The point is that one party offers and the other accepts.
- Consideration: This is more meaningful if we call it “benefit”. Each party has to gain some benefit. In an employment contract the employer gets some work done whilst the employee gets wages and other goodies.
- Clear terms: The terms of the arrangement have to be sufficiently clear.
- Legal intention: It has to be perceived that both parties intended that the contract be legally enforceable.
If there is a dispute about the content of a contract of employment and the matter goes to court, the judge will ask for written evidence. If there is none he will ask if there are witnesses. If none exist, he is likely to find against the employer who should have known better than to leave important matters unwritten. So the answer is to give your employees a note of all their terms and conditions in the form either of a contract or a statement. Even so, there will still be some terms that remain unwritten. Let’s look at the various types of terms in the contract of employment.
These are terms that have been explained to the employee either by committed them to writing and handing them over as a contract, as a statement, or as a reference document such as a handbook, or by expressing them orally. Anything you told an employee in a recruitment interview but did not write into the contract is therefore part of the contract. So take care what you say and, if it is important, write it down.
Implied terms – Statutory
Any rights afforded the employee by Act of Parliament, Regulations or other statutory authority are implied, and need not be written down. They apply to your employees so make sure you know what they are by getting yourself trained in employment law.
Implied terms – Common law
These are included automatically in every contract of employment and date back to times when the parties could not read and therefore agreed terms orally. They include matters such as the employer’s and employee’s duty of care for each other, the duty to take reasonable care of each other’s property, and your duty to safeguard each other’s confidences. Some of these centuries-old terms have been overtaken – note, not replaced – by statute law such as the Data Protection Act and the Health and Safety at Work Act but even so, if you manage to find a loophole in any of this statute law, you may still get stung under common law. If you feel that some of these common law issues are particularly important, for example your employees may not realise that they must not talk about your new products in the pub, then get them down in writing.
Implied terms – Custom and practice
This is a practice that has been going on for some time and is not unlawful and, although management can be expected to have known about it, they have done nothing to stamp it out. It has by default become part of the affected employees’ contract. If for several weeks you have turned a blind eye to them leaving early on Fridays, you cannot suddenly insist that they give up the practice. So don’t let bad habits develop in the first place.
Is all this a bit academic? Well, not judging from the way delegates on that course were making frantic action notes as we explained all this. You may think that you are safe if you copy a standard contract of employment or statement of terms and conditions from a guidebook, or copy one from you previous employer. But there is far more to contracts than that. In whatever form you issue a contract of employment, it must reflect the specific needs of your business, so you must have it constructed by someone
- who is trained to write contracts of employment
- who works in your business and knows it well
- who is aware of all the implied terms and how they may be handled safely.
So make sure that you are well protected!