Relying on unsigned contracts of employment

23 August, 2018

Contract with signature space and pen

In order for a contract to be enforceable, it must exhibit several key formalities. However contrary to popular belief, a contract need not necessarily be signed by the parties to it. The parties to an unsigned contract may be taken to have agreed to its terms in other ways, for example by beginning to perform it in a manner consistent with the written terms. Nevertheless, obtaining signatures provides highly persuasive evidence that all parties were in agreement to key terms.

The recent case of Tenon FM Limited v Cawley 2018 EWHC 1972 (QB) highlights the issues that may arise when relying on an unsigned contract of employment.

Facts

In Tenon the defendant, Susan Cawley, was the former Operations Director of the claimant cleaning company, Tenon FM Limited. Miss Cawley began working for the claimant in May 2008. The terms of her employment were recorded in a contract and included post-termination restrictions. These restrictions curtailed Miss Cawley’s ability to entice away the claimant’s customers, business or management staff for a period of 12 months following the termination of her employment. The claimant could not locate a signed copy of this contract.

Miss Cawley was promoted in December 2011 and the claimant asserted that she was subject to a new contract. This contract contained more detailed and onerous post-termination restrictions. Again, the claimant could not locate a signed copy of the contract.

In May 2018 Miss Cawley resigned from her position. It is alleged that she then took up employment with one of the claimant’s rival companies. It is also alleged that Miss Cawley induced another of the claimant’s employees to join her. The claimant sought injunctive relief against Miss Cawley on the basis that she had breached the post-termination restrictions set out in her contract.

Outcome of hearing

The claimant’s application for injunctive relief failed. Whilst the reasons for this included the poor conduct of the claimant, the High Court also pointed to evidential issues relating to Miss Cawley’s contract of employment. In particular, the Court considered that the absence of a signed contract meant that it was not clear whether Miss Cawley had agreed to be bound by the post-termination restrictions in question (among the other clauses of the contract). Indeed, one of Miss Cawley’s arguments was that she had not signed the contracts precisely because she disagreed with the post-termination restrictions. The claimant could not produce any evidence to rebut this argument.

Overcoming issues with unsigned contracts

The obvious solution to the problem of unsigned contracts is to ensure that all parties properly sign and date their agreements! However for logistical or administrative reasons, this may not be possible. In the absence of a signed contract the party seeking to rely on its terms should be able to provide other evidence that it was performing its contractual obligations on the basis of the unsigned terms. This could include correspondence to that effect.

Where a contract is varied following its signature, the terms of (and agreement to) the variation should be duly recorded in writing, together with the “consideration” provided for the variation. In an employment context, this consideration is likely to be the payment of money such as a salary increase.

Camilla Beamish

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