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Contractual Terms Notes

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Construction, incorporation and variation of terms Subject to what has been said about the very slight normatve efect of sectons 1 - 4 ERA 1996, the terms of the contract will be determined by techniques of constructon derived from the common law. The approach taken to construing commercial agreements may be of litle help or even positvely misleading. There may be a formal ofer of employment contained in a writen document to which the employee is invited to assent, but even then it would be unusual for the document to consttute an exhaustve account of the contract terms. It would be usual for some terms to be implied or incorporated by reference to a number of external sources such as a collectve agreement or company handbook. The manner in which the contract is performed is also an important guide to its contents. In principle, the substance of a contract, once made, cannot be modifed merely by the partes' subsequent behaviour; contractual obligatons can only be varied by mutual agreement. But this is to assume that the substance of the original agreement is completely clear- this will rarely be the case with contracts of employment. Two forms of practce will be important in construing the agreement: the custom and practce of the plant/establishment, which the partes may (nor must) be assumed to have had in mind when they contracted; and their own conduct, subsequent to the agreement which may be taken to be a guide to what they initally intended. Incorporation of terms from collective agreements Labour law in Britain has played a negligible role in regulatng and enforcing collectve agreements between trade unions and employers. There is a statutory presumption that a collective agreement is "not to have been intended by the parties to be a legally enforceable contract". This presumption is displaced if the agreement is in writing and contains a provision stating that the parties do intend it to have legal efect, whereupon it is conclusively presumed to be a legally binding contract. Agreements made binding in this way are very rare. However, the non-enforceability as terms of the vast majority of agreements at the collective level does not afect their enforceability as terms of the individual contract of employment (Marley). This normatve or term-setng functon of the collectve agreement, as distnct from its contractual functon of regulatng the relatonship of the collectve partes, fnds expression through the incorporaton of terms into individual contracts. At no point has general legislaton in the UK provided for automatc and compulsory efect to be granted to the normatve terms of sector-level collectve agreements. In the absence of statutory regulaton the issue of incorporaton is dealt with by the common law, which knows no principle of automatc and compulsory efect (Dudfield). The legal basis for the normatve efect of collectve agreement must rest at the level of the individual contract of employment, because the collectve agreement lacks the "regulatory efect" or force of law accorded to it in other systems. A number of contractual explanatons for incorporaton have been ofered...


One possibility is that the trade union, through one or more of its ofcials, negotates with the employer as agent for each individual union member as principal, with the resultng terms forming part of the contract of employment without the need for further agreement (Holland). It is unconvincing: (i) it is unable to account for the incorporaton of terms into the contracts of employment of nonmembers (ii) nor does it deal either the positon of employees who either join the employment, or conceivably the union after the collectve agreement has been concluded. (iii) it would also suggest that an individual member can unilaterally revoke his authority to the union to negotate on his behalf and in this way avoid the normatve efect of the collectve agreement completely. This is unlikely to refect the intenton of either the trade union or the employer. From the union's point of view, it would be undesirable to allow the efect of the collectve agreement to be fragmented by enabling non-unionists to opt out. For the employer, collectve bargaining is a way of avoiding the high transacton costs involved in treatng union members and non-members diferent and being required to negotate individually with those who are outside the union. In practce, terms and conditons of employment are normally applied uniformly to members and nonmembers alike. To diferentate between these two groups may, depending on the employer's purpose, give rise to a breach of the ant-discriminaton provisions of TULRCA 1992. There is no reason in principle why an agency agreement should not be made between a trade union and an individual member, nor is there any obstacle to an employer negotatng with a trade union on the basis that the fnal terms will take efect in individual contracts of employment via such agency. However, there would have to be clear evidence that these were the intentons of the partes concerned. The mere existence of the contract of membership between union and member does not authorise the former to act as agent for the later (Boxfoldia - a union has no implied authority to terminate the employment contracts of its members by giving strike notce to their employer); something more specifc is needed (Burton Group). The bridge term Most generally accepted basis for incorporaton is that it takes place through a bridging term in the contract of employment (Hepple). The principal functon of the bridge is to identfy the external source from which the terms of contract are to be drawn, but it may also perform other functons: it may determine which terms are appropriate for incorporaton and resolve conficts between diference sources. Once it is present, incorporaton may take efect automatcally in the sense that no further authorisaton or agreement by either party to the contract of employment is needed, although this will depend to a large degree on practce in the workplace in queston. A bridging term could be expressly agreed by the partes (Natonal Coal Board v Gallery). It is more likely that any express reference will be found in the writen statement of terms and conditons. The writen statement is not the same thing as the contract, but it is evidence of it; hence, a reference to the normatve efect of a collectve agreement can be regarded as signifcant evidence of a term which was either previously expressed by the partes or tacitly accepted by them.

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