Termination of contract

Photo by Craig Whitehead on Unsplash

It has just been announced that the well known UK construction company Balfour Beatty has just had a contract terminated by one of its clients.

The client in question is MI6 or the UK Special Intelligence Service, the equivalent of the CIA and the employer of Britain’s best known (but fictional) spy – James Bond. The Service is based at Vauxhall Cross on the River Thames.

Termination of contract can be a pretty dry area, but mix it in with the world of secret intelligence services and you have a story that will be of interest to a potentially large audience.

Who cares?

The company’s shareholders will almost certainly care about this and a large part of the public will be keenly interested to know the facts behind this development.

What went wrong?

Balfour Beatty had been contracted to refurbish the HQ of MI6. In order to carry out the job, the company had in its possession floor plans of the building. Somehow these plans went missing – although they were later recovered – but too late the damage had been done.

Mindful of the mind boggling ramifications of this huge security breach, the UK Foreign Office, which has overall responsibility for the work of MI6, promptly removed Balfour Beatty from further involvement in the middle of the refurbishment project.

A link to the story as reported in The Financial Times can be found below:

https://www.ft.com/content/81d4ac8c-28d9-11ea-9a4f-963f0ec7e134

I would assume that the Foreign Office is on pretty safe legal ground when it made the decision to terminate Balfour Beatty’s contract. The loss of highly confidential documents by the company could represent nothing less than a material breach of contract. This arises in situations where one of the parties acts in such a way that it completely undermines the contract. The breach, in other words, is so serious because it goes to the very roots of the contract.

The victim of the breach can then potentially use the remedy of rescission i.e. terminate the agreement. The remedy of damages is also available to the victim.

Rescission is actually a much more common remedy than you otherwise might think. In terms of both the Sale of Goods Act 1979 and the Consumer Rights Act 2015, a buyer may choose to terminate a contract of sale in situations where the trader supplies goods that fail to comply with, for example, the implied duty of satisfactory quality.

In employment contracts, an employer is entitled to dismiss an employee in circumstances where the individual commits an act of gross misconduct (theft, violence, gross negligence or failure to follow lawful orders). The Employment Rights Act 1996 recognises that there will be situations where the employer is entitled to terminate the contract of employment and there will be nothing unfair or wrongful about the dismissal (presuming, of course, that proper disciplinary procedures have been followed).

In the well known Scottish employment law decision of Macari v Celtic Football & Athletic Club [1999] IRLR 787 SC, a football manager had his contract terminated quite legally by his employer owing to the fact that he had repeatedly failed to follow lawful and reasonable orders. This failure by the employee to honour the terms of his contract was nothing less than a material breach of the agreement.

Conversely, an employee may choose to regard the employment contract as terminated in situations where the employer has breached the implied duty of trust and good faith. This could occur where the employee was subjected to bullying and harassment by colleagues and the employer (being aware of this) does nothing meaningful or concrete to deal with this. In the face of the employer’s indifference (or collusion), the employee could regard him/herself as constructively dismissed.

Particularly serious for the employer could be situations where the bullying or harassment are motivated by hostility towards an individual’s protected characteristic in terms of the Equality Act 2010 e.g. age, disability, gender reassignment, race, religion or belief, sex, sexual orientation.

Back to Balfour Beatty: it looks as the company has no one to blame for this mess, but themselves. MI6 or the Foreign Office obviously felt that the loss of sensitive (Top Secret?) documents was such a serious development that there was no choice to terminate the contract with immediate effect.

Copyright – Seán J Crossan, 29 December 2019