Disclaimer: Anything posted in this blog is for general information only and is not intended to provide legal advice on any general or specific matter.
Matthew is a partner at VWV in the Commercial Law team. He has worked in the education sector for over 21 years, and with academy trusts since 2007, and has significant experience in general commercial law as well as public procurement advising on everything from individual contracts through to overarching strategic support.
In the second of two blogs on this subject, Matthew will be looking at key terms included in contracts and things you need to look out for. As with the previous blog, which looked at what a contract actually is, this blog aims to demystify the process and provide you with support so that you know exactly what you are looking for. This applies whether you’re drafting your own contract or whether you’re reviewing a set of standard terms and conditions and want to make sure that you’re not exposed to too much risk.
A Deed or Simple Agreement
This is simply a way of differentiating between two different types of contract. The main impact of whether a contract is a deed or a simple agreement is the length of time you get to take action if something goes wrong. If you enter into a contract as a simple agreement and the service provider gets something wrong, you have six years to take action. If it’s a deed, you have 12 years to take action. Deeds tend to mostly be used for things like construction projects where for example you might not find out that the foundations weren’t put in properly for 10 years. Using a deed also avoids the need for consideration, so for example if you are agreeing a variation to a contract and the provider is providing a different service with no change in the fee then this should be done with a deed.
Parties
Always make sure that both parties’ details are clearly set out, because if there’s a problem you want to make sure you know who it is you’re going after. Most of the time, you’ll be contracting with limited companies. If that’s the case, make sure that the company number is used. Companies can change names at the drop of a hat. The only thing that is unique to a company is its company number. If you have that, you know exactly who it is that you’re dealing with.
Specification and Payment Terms
These two things aren’t strictly legal, but are often more important than anything else. The specification details what you want the provider to do. That needs to be set out in sufficient detail so that you know what it is you’re going to get. If you’re expecting them to do something specific and it is not included in the specification, they’ll be entirely within their right to refuse to do it. Check the specification and the services definition very carefully.
Equally on payment terms make sure it is very clear what you are paying for and how you’re paying. One specific example of where this is important is cleaning contracts. Cleaning contracts are often a source of argument for schools where cleaning is not done to the expected level. Very often cleaning contracts are structured on the basis of a specified number of hours of cleaning time a week. However, for example if you only have half the number of hours provided in a week is there a clause which states you will only pay half the fee?
If there is you’re protected and it encourages the provider to provide the full specified number of hours. If there isn’t, it doesn’t matter how many hours are provided, they are likely to still ask for, and expect to be paid, the full fee.
Commencement/Durations/Extensions
There should be something clearly setting out when the contract starts and when it ends. In the education sector there is a tendency to use rolling contracts, e.g. a contract which initially runs for two years after which, unless you have served notice three months in advance, it will automatically extend for another two years.
This is not usually an appropriate approach. If you want to extend a contract, there should be a proactive process whereby you state whether you want to sign an extension.
If the contract says it automatically extends and you don’t serve notice in time, then you’re bound into that extended term and it is often very difficult to argue against it.
If you are presented with a rolling contract, you can either refuse to sign, or change it, or the moment that the contract starts, serve that notice to say you are hereby terminating in two years’ time.
Safeguarding
If the provider is going to have people coming onto school site, do not rely on standard terms and conditions. Make sure that safeguarding terms are explicitly included with full detail, such as the requirement to have DBS, the requirement to have all the information provided to you in advance etc. It’s your responsibility, and your liability if something goes wrong.
Key Performance Indicators
These are vital if they can be used for the service being provided. You must include what service levels you expect and the mechanism which will be used to calculate the service credits (or deductions) you will apply if service levels are not met. KPIs should be set to encourage the provider to provide the services properly. The service levels should be set at an appropriate standard, and the deductions should be significant enough to incentivise the provider to remedy any problems (but not so significant as to make the contract financially unviable for the provider).
Staff and TUPE
If you have staff that are going to transfer, make sure that the TUPE terms are set out clearly and properly. Make sure that the provisions at the end of the contract are set out so that the company will cooperate when the service transfers to the next incoming provider.
For example, when the contract’s coming to an end, you want to make sure that they can’t transfer your well performing staff to another school and transfer their poorer performing staff to your school.
Limitations of Liability
This is important to look at, particularly if the company has provided their own standard terms and conditions as they will try to limit their liability. You cannot limit liability for personal injury and death and fraud, but other than that it’s open in a contract to cap your liability. So as an example the service provider could cap their liability to £10 ,000. This means that if they do something which causes you to suffer a loss, and that loss is bigger than that cap, you’re going to have to make up that difference. If, in this example, they cause £25,000 of damage – either accidentally or on purpose, and their liability is capped at £10,000 you are still going to have to pick up that £15,000 pound balance yourself. Always make sure that if there is a limitation of liability clause the level is appropriate and high enough to cover any potential loss that the provider can cause.
Are you going to require them to carry insurance?
Having insurance means, from your perspective, if something goes wrong and the provider is liable to pay you half a million pounds, then the insurance company will cover the loss and you don’t have to rely on the provider being able to pay. If it is likely or possible that they can cause you a big loss, make sure they are required to have insurance to cover that.
Data Protection
If personal data is going to be shared between the parties, you need to have proper terms that cover data protection, how the data will be shared, who’s responsible for it, who is in control of it and what systems are in place to protect it.
Intellectual Property
If intellectual property, is involved or if the provider is creating something then you need to decide you owns it and who has the right to use it.
Freedom of Information
Academy trusts are subject to the Freedom of Information Act and as such any company you work with should be placed under an obligation to help and assist you with that and understand that this obligation overrides confidentiality.
Force Majeure
Force majeure terms are important. If the company cannot provide the service, or if you cannot provide them with access to provide the service, as was the case during COVID, then what happens? What are the rules? What are the continuing obligations of each party?
Subcontracting
And finally, subcontracting. There should always be a clause saying that your provider cannot subcontract without your consent.
Matthew did an excellent webinar with us on this subject which you can also watch – and get the benefit from some insightful and interesting questions from the audience.