Contractual agreement of redundancy: when is a gift a gift? – Evergreen Timber Frames v Mr NK Harrington UKEAT 0072 20 AT (V)
We wrote recently about the essential elements of a contract when looking at construction. In a recent appeal, the Employment Appeal Tribunal had to consider the essential elements of a contract in terms of its formation, and whether it existed at all.
The facts in Evergreen Timber Frames v Harrington
The Claimant, Mr Harrington had been employed by the Respondent, Evergreen Timber Frames, as a manager. Due to difficult trading conditions, Mr Harrington’s employment was terminated by reason of redundancy. Mr Harrington brought a claim in the ET for breach of contract. His claim concerned his assertion that the Respondent had agreed with him that, as part of his redundancy, he would be given a company car, company laptop, and a bonus months’ pay. The appeal to the EAT focussed on the car, which was the only element of the claim for which the ET ruled in the Claimant’s favour.
Mr Harrington claimed that his letter of redundancy included an offer of the car, which he had subsequently accepted. The letter stated that the Respondent “would also like to gift [him] a Nissan Qashqai”. In his reply to that letter, appealing some of the other terms, Mr Harrington accepted the term concerning the car.
The law and the appeal
In contract law, there are a number of things which are needed for a contract to be formed. Those are:
- An offer
- An acceptance
- Intention to form legal relations
The main area of dispute in this case was about the offer and acceptance. The Respondent appealed in relation to first the offer, claiming that the redundancy letter didn’t constitute an offer in a contractual sense. The subsequent ground was that, even if the letter did count as an offer, it hadn’t been accepted when Mr Harrington wrote his letter of appeal.
Judge Barry Clarke in the EAT ruled that the letter of redundancy had indeed been an offer for the transfer car. He dismissed the Respondent’s arguments that the words “gift” rendered this unenforceable; the context of a contractual and statutory letter was enough to give it its true meaning as an offer.
Judge Clarke, however, did not agree with the ET’s decision that Mr Harrington’s reply had constituted an acceptance. The reason for this was that it risked things becoming far too complex; in a redundancy negotiation, there may be many back-and-forth letters between the parties before a final agreement is reached. To take one portion of an offer and accept it, whilst trying to improve the other elements of it, was not a valid acceptance, said Judge Clarke. He drew attention to the relevant passage in Chitty on Contracts (33rd Edition):
“A communication may fail to take effect as an acceptance because it attempts to vary the terms of an offer. Thus an offer to sell 1,200 tons of iron is not accepted by a reply asking for 800 tons”
The Respondent’s appeal was allowed on the acceptance ground, but not on the offer ground. Judge Clarke remitted the case back to a differently constituted ET, as there were elements of the Claimant’s case which had not been brought decided on by the initial tribunal which may now become more important after the result of the appeal.
This case is another example of the fact that, although an employment lawyer’s wheelhouse might be issues of employment, they must be brushed up on their contract law, too.