Recruitment agency contracts with clients: Whose standard terms prevail?
Our recent experience has involved us advising a number of recruitment agencies, unwittingly bound to their client’s onerous contract terms, believing that no such agreement existed because “I never signed anything!”
Known in the legal world as “the battle of the forms”, it is a common scenario when businesses exchange communications with the intention of forming a contract whereby each business tries to incorporate their standard terms. Whilst each case will have a different set of facts, the courts will use traditional principles of contract law to determine whether there is a contract and whose standard terms apply, usually looking to establish where an offer made by one business is accepted by another – either by signing an agreement, confirming with words or simply acting in a way that shows the offer is accepted.
The most likely decisions by the courts in cases involving a “battle of the forms” are:
- The last shot fired wins – the last set of terms sent before an agreement is finally reached (either in writing or otherwise) are the terms on which the contract is made. You may have sent your standard terms to your client in the course of the email exchange but if they reply and accept, attaching a copy of their terms, it is likely that they have won this particular battle and their terms prevail.
- There is no contract – depending on the circumstances, the court may consider that the correspondence and conduct between you and your client demonstrates that no contract has been reached.
- Nobody wins, express terms prevail – the court will look to the correspondence and actions of the two businesses and if it shows that the parties intended for particular terms, other than their standard terms, to be incorporated into any agreement between them, the court may decide that those terms prevail and neither set of standard terms apply, even if these were communicated.
- Nobody wins, implied terms prevail – it is possible that the exchanges between you and your client did not result in either side’s standard terms being incorporated – for example, you may have referred to the standard terms but not provided a copy. The court may decide that certain contractual terms were implicit in the agreement between you and your client.
We have recently acted for a recruitment agency that was restricted by their client’s onerous terms and conditions. The client in question was a large company in the industry sector that the agency operated in and the terms prevented the agency from contacting any of the client’s employees as candidates for a period of one year, even in circumstances where the initial relationship had not resulted in a placement. We were able to advise on how best to manage this and how to negotiate with the client, however, a better understanding of the rules and risks can help agencies to avoid landing in those situations.
The wide range of possible outcomes set out above can leave parties with some uncertainty and so we would recommend the following best practice to ensure that there is sufficient clarity as to the terms agreed between you and your clients:
- Be clear in your pre-contract correspondence that any contract will be on your standard terms and either attach or provide copies or ensure that there are live links to the website location of such terms.
- Don’t get caught by the “last shot fired” – ensure to respond to confirm that any acceptance will be in accordance with your standard terms and provide a copy or a link.
- Ensure that your staff are trained and familiar with this approach.
- Ensure that any telephone or face to face discussions are also expressed as being on the basis of your standard terms to avoid being bound by terms agreed in that discussion which you did not intend to have a contractually binding effect.
- Avoid requiring a signature on your standard terms – if you don’t get this, it is more difficult to argue that they have been incorporated.