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Sean
Sean, Experienced lawyer
Category: Australia Law
Satisfied Customers: 852
Experience:  Law degree with 1st class honours from Australian National University.
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We own and operate a Australian (NSW) registered company which

Customer Question

We own and operate a Australian (NSW) registered company which supplies IT contractors to end clients. We have one such IT contractor who wishes to terminate the contract with us and carry on working for the client directly.

The grounds he alledges for terminating the contract is two late payments. He is remunerated via a payroll company on 14 + 14 days, i.e. every two weeks he sends in an invoice and is paid two weeks later. He alledges that he has been late paid twice in the last six months, once he was paid one day late and another he was paid two days late, but this was because there was an Australian public bank holiday.

We have been paid late from the client seven times in the last seven months and we have rejected his basis for terminating the contract.

What should we do ?
Submitted: 1 year ago.
Category: Australia Law
Expert:  Sean replied 1 year ago.

Hello and thank you for your question. My name is Sean and I would be happy to assist you with this.

Do you have a copy of his contract that you could upload for me? It would be much easier for me to provide you with guidance if I can see his contract.

Also, has he given you formal notice. If so, how much notice has he given?

Here is how you attach a document:

First type some text, anything - just a few words. Then highlight the words with your mouse.

Once you have done that, click the chain icon between the happy smiley face and the tree.

A pop up window will open. The first line should say Link URL. At the end of it there is a little square icon with a blue line at the top.

Click it and an attachment upload box will pop up.
Customer: replied 1 year ago.

I will have to locate the contract so please bear with me

Expert:  Sean replied 1 year ago.

Sure thing. No problem.

Customer: replied 1 year ago.


Dear AustralianLawyer,


 


I believe that I have attached it correctly.


 


Regards,


 


Rory Dwyer


 


 

Expert:  Sean replied 1 year ago.

Thank you Rory, I have been able to view the contract.

I don't think the grounds the contractor has given you are proper grounds for terminating the contract. However, under the contract, it is possible for the contractor to terminate his agreement with you by giving four week's written notice. The contractor does not need to have a reason for doing this - they can simply give four week's written notice and the contract will terminate on the date specified in the notice.

During the notice period, the contractor will be prevented from working for the client directly. However, your contact does not contain any provisions that prevent the contractor from working for the client after the notice period has ended. The contract alludes to such provisions in the paragraph headed "Obligations Continue", but these provisions do not actually appear in the contract. Therefore, after the expiry of the notice period there is nothing that allows you to prevent the contractor from working directly for the client (provided he does not use any of your confidential information).

So unfortunately your legal options are very limited here. Therefore, you are better off putting your efforts into securing your relationship with the client rather than trying to prevent the contractor from leaving.

I would also suggest having your contracts reviewed and wording included that prevents your contractor from working directly for the client after they terminate the agreement.

I hope this helps. Please let me know if you need any more information.

Regards,
Sean

Customer: replied 1 year ago.

Dear Sean,


 


Thanks for the reply. It has got a little bit more complicated. Unbeknownst to me, one of my fellow directors appear to have signed an amendment to the contract between our company and the client from the original agreement that if there was a late payment, they could give five days notice to terminate the contract. Please see attached contract with the client and then the clients termination notification. I have tried to upload but the screen message says the file is too large. Is there another way of getting you the documentation ?


 


Regards,


 


 

Expert:  Sean replied 1 year ago.

Hi Rory, if you aren't able to upload the document, you can email it to: info@justanswer.com and ask them to forward it to AustralianLawyer in the Australia Law category. Once I get it I can review it and let you know what I think. Keep in mind that it may take 24 hours to get to me as it goes via the US.
Regards,
Sean

Customer: replied 1 year ago.


Let me try a different approach. Here is a copy of the termination from the client


 


I will try and upload the original contract for the client on another response from.


 


Basically, they are terminating the contract because a payment was one day outside of the 14 days payment terms because it was a holiday in Australia and the banks did not process it until the following day. Even though we made the payment in time

Expert:  Sean replied 1 year ago.

Ok thanks for this. They are really going for a technicality here. Can you tell me why the second payment was late?

Customer: replied 1 year ago.


Yes, we have a payment processing function in the UK and the payment was made in the correct time frame but unbeknowst to us, it was a bank holiday in Australia for the Queens birthday and so the bank didn't apply it until the following day.


 


I also have another question, which is sort of linked, how can I ask that question so that you get to answer it. Also, where are you physically located ?

Expert:  Sean replied 1 year ago.

Sure, you're welcome to ask another question. You should be able to type it where you normally ask questions and it will come to me. I am located in Melbourne.

Customer: replied 1 year ago.

Hi Sean,


Any idea on the legal position I have in relation to the termination based on a payment being one day late due to the bank holiday in Australia ?


 


Also did you get the contract that I sent through via email ? It say in there that if there is a dispute that it should go to arbitration, or is the clause too restrictive and as such not enforceable ?


 

Expert:  Sean replied 1 year ago.

I just need to see the contract so I can tell you about your legal position regarding termination. I haven't received the contract by email yet. How long ago did you send it?

Customer: replied 1 year ago.

Dear Sean,


 


I called just answer on Friday and they told me to send it to XXXXX@XXXXXX.XXX marked for you attention.


Is there another way I can get it to you as it is just over the 5meg limit ?


 

Expert:  Sean replied 1 year ago.

Hi Rory, sorry the email address didn't come through on the message you just sent. They get blocked out on this site so nobody's personal details go on there. Did you send it to info@justanswer.com? That is the only way I know of if you aren't able to upload it. Maybe you could just upload part of it? ie the termination provisions?

Customer: replied 1 year ago.

Hi Sean,


 


I sent it to the support email addres. I will try and break it down and post on here

Customer: replied 1 year ago.


Dear Sean,


 


Here is the contract broken down into two parts


 


 


 


Part 1


 


Part 2

Expert:  Sean replied 1 year ago.

Ok thank you, I have now received both documents. The only thing is Part 1 only had ever second page so I couldn't see clause 13.1, which is the clause that they terminated under. However, so that we don't have to much around with the documents anymore, let me tell you what I'm thinking about this.

If the amendments to the contract allowed them to terminate if you didn't follow their reasonable instructions, then they are permitted to terminate without notice under that clause. However, it is questionable whether it can be said that you did not follow their reasonable instructions. You intended to transfer the money and were impeded by something outside of your control. Therefore, I think you have a good argument that you didn't breach the clause and there are not grounds for termination.

However, under clause 13.3 of the contract, either party is entitled to terminate on 30 days notice. There does not need to be a reason to do this. Therefore, the company would have a right to terminate under this clause in any event and it would be difficult to force them to stay with the contract for any longer than that. Certainly, any damages claim by you would be limited to the amount you would have earned over this period.

Therefore, I think you need to consider the utility of pursuing this against them. You first need to get over the hurdle of establishing that you didn't breach, and then you would have a very limited right to enforce the contract of claim damages. So if they are not wanting this relationship anymore, I think it is important to consider whether it is worth your while pursuing or whether you would be better off putting your time into pursuing other business?

Customer: replied 1 year ago.

I have just noticed that the copy of the contract only has the even number pages. What about any disputes going to arbitration ?

Expert:  Sean replied 1 year ago.

You could take it to arbitration (I can't see whether there is an arbitration clause in the agreement). But the same analysis will apply at arbitration as it would at a court. It would just be less formal and run by an arbitrator rather than a judge. This would certainly be a less costly and time consuming route if you want to challenge their termination. How much longer is there to go in the current period of the agreement?



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