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If the conditions of an offer of employment are referred to in the employment contract and the conditions are not met before employment commences, is the contract still binding?

03 June 2021

"If the employment contract includes an entire agreement clause then the employer must ensure that the conditions are satisfied before entering into the contract." If the employment contract does not include an entire agreement clause, or if there is an entire agreement clause but the clause refers to the offer letter/conditions, what happens if the conditions are not met but by the time the employer is aware of this the employee has already commenced employment under the employment contract?

In this situation, is the contract no longer binding? Will the employer still need to give contractual or statutory notice?

The key question here from a contractual point of view is whether the offer is truly conditional, as if it is, and all the conditions are not met the offer lapses and is not capable of acceptance.

If a contract is expressed to be subject to a condition precedent, no binding contract will exist until the condition precedent has been satisfied. The significance of having an entire agreement clause is that upon signing the contract it technically excludes any offers or agreements made before the contract is entered into (although it may nonetheless be possible to argue that the failure of a condition precedent being met means the contract didn't even come into existence.

In the absence of an entire agreement clause or a clause that expressly refers to the conditions being met before the contract can be binding, the contract does not become binding until the conditions precedent in the offer are met.

However, the issue here is that the actions of the parties, by commencing employment, could be indicative of an intention to create a legal relationship and this may give rise to a contract arising despite the offer conditions not being met.

Ultimately, this would boil down to a question of formation if it went before the court or tribunal, as to whether a contract has been created. From an employer's perspective, allowing an employee to commence employment before conditions precedent have been met is a risky strategy. If it was deemed that a contract has come into force when the employee takes up employment, then termination would be subject to the usual statutory notice requirements. If, however, it was treated as a withdrawal of an offer or indeed, that the offer has lapsed as the reference condition was not met, then a binding contract would not exist and no notice would be payable. This will depend on the facts, such as the wording of the offer or contract and other circumstances.

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