The construction of the employment contract and the terms implied into it. Wood v Capita Insurance Services Ltd; Malik v Bank of Credit and Commerce International SA.
Contract; termination on reasonable notice. A licence to manufacture ejection seats and a sole selling agency contained no provision for termination. McNair J held that there is no presumption of permanence: whether such a contract can be determined depends on its true construction, approached on the common law basis of reasonableness. Both agreements were terminable, the agency falling into the class of agreements analogous to master and servant which end on reasonable notice. Reasonable notice is fixed by the ordinary principles for implying terms 'with regard to the facts as existing at the time when the notice was given and not at the time when the contract was made' (holding (3) in the report); 12 months was reasonable for each. In Kankanalapalli [2026] EAT 49 at [39] the EAT treated the case as one on whether a contract is permanent or terminable, not as authority on when reasonable notice is assessed, and held that reasonable notice is assessed when the contract is made (Yoo Design Services v Iliv Realty at [51(vii)]).
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Contract; variation; unilateral pay cut. The employer unilaterally imposed a reduction in wage rates, wishing to go on employing the whole workforce. The employee continued to work and receive wages while reserving his rights and protesting about the reduced amount. The House of Lords (Lord Oliver giving the sole reasoned speech) treated the reduction as a repudiation that did not end the relationship: a fundamental breach other than a purported dismissal does not terminate the contract automatically and needs acceptance. The case confirms that an employee faced with a repudiatory pay cut need not resign but may remain in employment and sue for breach of contract. Lord Oliver reserved his opinion on an outright dismissal or walk-out.
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Contract; conditions precedent; references. The offer of employment was 'subject to receipt of satisfactory references' and the employer considered the references produced not to be satisfactory. The question was whether the plaintiff had an arguable case that he was party to an unconditional contract of employment. Mustill LJ felt little doubt that 'satisfactory' meant satisfactory to the employer; Ralph Gibson LJ expressed the same view. Global Asset Capital v Aabar [2016] EWHC 298 (Comm) at [125] reads the Court of Appeal as concluding that the construction needed to be considered at trial. Distinguished in Kankanalapalli [2026] EAT 49, inapplicable where references were never sought.
Contract of employment; the House of Lords confirmed the implied term of mutual trust and confidence: an employer must not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust. Stigma damages are recoverable where the employer's corrupt conduct damages former employees' employment prospects and causes quantifiable, foreseeable loss.
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Contract of employment; formation; notice. An offer letter of 3 December 1996 offered a senior features writer post; the claimant's return of an application form saying she had already been offered the job concluded the contract, which said nothing about probation or notice. After she started, the employer sent a statement of terms providing for a three-month trial period on statutory notice and asking her to sign and return it to signify acceptance. She never did. The EAT (8 December 1998) upheld the tribunal: a document that by its own terms awaits written acceptance remains an offer, and 'an offer is not a term of a contract'. Going along with some of its terms (pension deductions, holiday, the grievance procedure) did not mean the rest were accepted: 'It is not an all or nothing situation.' Statutory minimum notice is a safety net, not evidence of what is reasonable, and three months' reasonable notice stood. Relied on by the claimant in Kankanalapalli [2026] EAT 49 at [32] against reading an employer's standard terms, first produced in litigation, back into a contract already formed.
Contract; conditions precedent; references. Langstaff J (as he then was) confirmed that it was a matter for the employer whether the references were satisfactory. He expressed some doubt whether a contract had been formed at all, because of the specific wording of the offer. Distinguished in Kankanalapalli [2026] EAT 49, inapplicable where references were never sought; neither Wishart nor Mellors addressed the status of a conditional contract before references had been obtained.
Wrongful dismissal; damages; common law damages cannot be recovered for the manner of dismissal (the 'Johnson exclusion zone').
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Variation of contract; acceptance by conduct; the source of the 'only referable to' test. Per Elias J: the fundamental question is whether the employee's conduct, by continuing to work, is only referable to their having accepted the new terms imposed by the employer. If the conduct is reasonably capable of a different explanation, it cannot be treated as acceptance. Approved and applied by the Court of Appeal in Abrahall v Nottingham City Council.
Approved by Abrahall v Nottingham City Council [2018] EWCA Civ 796 (2018-04-19)
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Breach of contract; probationary period; implied terms. The contract provided a three-month probationary period with one week's notice, three months' notice after successful completion, and an express right to extend probation where an objective assessment had not been possible. The employer did not extend it. After it expired, over the claimant's holiday, the employer held a review and dismissed her on one week's notice. The tribunal implied a term allowing the review to be completed within a reasonable time after expiry. The EAT (6 February 2007) allowed her appeal: the term was not necessary, since the express right to extend met the employer's need and it had not been used; it would have given the employer a further right inconsistent with the express one; and a reasonable bystander in the employee's shoes would have taken probation to be complete once the period ended unextended. Assessment of her three months' notice pay, including any statutory adjustment and credit for earnings, was remitted.
Contracts; unilateral variation; a robust variation clause in the handbook allowed the employer to change pay terms without consent.
Contract; incorporation of collective agreements; enhanced redundancy pay; custom and practice; compromise agreements. A photographer employed from 1989 and dismissed for redundancy on 4 February 2006 claimed an enhanced redundancy payment of two weeks' basic pay for each completed year of service under a collective agreement of 22 August 2002 between MGN and the British Association of Journalists, incorporated into his 2005 contract.
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Termination of contract; elective theory; a wrongful repudiation of a contract of employment does not terminate the contract unless and until the other party elects to accept the repudiation.
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Supreme Court restated the primacy of clear contractual language. Where the words of a term are unambiguous, the court gives effect to them even if the commercial result is surprising or harsh. Commercial common sense is not a licence to rewrite a contract in defiance of its language.
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Contractual interpretation; textualism vs contextualism; the Supreme Court clarified that interpretation is a unitary exercise involving both the language of the contract and the factual context.
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Variation of contract; acceptance by conduct; pay freeze. The group 1 employees had a contractual entitlement to pay progression [55]. On Elias J's test in Solectron, acceptance of a varied term by continuing to work must be unequivocal: conduct reasonably capable of a different explanation is not acceptance [87]. Protest at collective level can negative any inference of individual acceptance [88]. Underhill LJ held the tribunal entitled to find the freeze was not accepted, for three reasons [101]: the variation was wholly disadvantageous, with no contractual promise against redundancies [102]; it was not put to employees as needing their agreement, the Council's position being that it was contractually entitled to impose it [103]; and the unions protested strenuously up to and beyond implementation [104]. Almost two years without complaint was not unequivocal acceptance, though the second judgment would not rule out acceptance where redundancy can only be avoided by accepting the new terms [109], [111]. Appeal dismissed, cross-appeals allowed [105].
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Contract; implied terms; Carr LJ set out the modern framework for implying terms into contracts. Applied in Kankanalapalli [2026] EAT 49 in the context of implying a reasonable notice term into a contract of employment silent on the point.
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Contract; 'fire and rehire'; terms implied in fact; injunctions. Tesco had promised relocating distribution-centre staff 'retained pay' as a permanent feature of their contracts, and later proposed to dismiss and re-engage them without it. The Supreme Court allowed the union's appeal from [2022] EWCA Civ 978. Lord Burrows and Lady Simler (Lord Lloyd-Jones agreeing) held that a term was implied in fact, on the business efficacy or obviousness test, precluding Tesco from exercising its contractual right to dismiss on notice for the purpose of removing or diminishing the right to permanent retained pay [45], [57]. Lord Leggatt and Lord Reed agreed in the result, and the injunction granted by Ellenbogen J was restored [137]. Lord Leggatt's suggestion that the common law rule permitting an unreasonable or capricious dismissal might give way to a term of the Braganza kind implied in law [128] was not adopted by Lord Reed, who said the question did not require decision [149].
“We would therefore hold that, applying the test of business efficacy (or obviousness) Tesco is precluded by an implied term from exercising the contractual right to dismiss the claimants on notice for the purpose of removing or diminishing their right to receive permanent retained pay.”Lord Burrows and Lady Simler, at [57]
Cites
References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.