Clear as day?

A recent Employment Appeal Tribunal case considered whether terms for a pay increase were sufficiently clear as to be enforceable. Allison Cook reviews the ruling.

Where contracts of employment contain provisions for pay to be determined by specified collective agreements such as the National Joint Council (NJC) Agreement for Local Government Services, such agreements must provide certainty to the Parties.

If a particular term is vague or ambiguous it may not be legally enforceable, despite the intentions of the parties. Whilst courts will endeavour to give effect to the intentions of the parties, this is not always possible. Generally, an "agreement to agree" is not enforceable as a contract because it lacks the necessary certainty. The Employment Appeal Tribunal (EAT) in Anderson & ors v London Fire & Emergency Planning Authority had to assess if terms of a pay increase were sufficiently certain.

The claimants' union and the respondent had negotiated a three-year pay settlement as part of a collective agreement, incorporated into the claimants' contracts of employment. The agreement committed the respondent to award a pay increase of either 2.5% or the NJC settlement plus 1%. The Employment Tribunal (ET) thought this was no more than an 'agreement to agree'. They relied on two reasons. First, the NJC settlement was yet to be determined at the date of the collective agreement; and secondly, the agreement was silent as to how the choice was to be made between the two options.

The EAT disagreed. The collectively agreed term to fix a pay increase for 2009 by reference to the future NJC agreement was sufficiently certain to give rise to a contract. The existence of choice in an agreement does not necessarily render the agreement invalid.

The EAT found that the meaning of the clause was clear and that "or" meant what it said, namely that pay rates could either be increased by 2.5% or by 1% above the NJC settlement figures for the 2007-2009 period. The Respondent fulfilled its contractual obligation by paying in accordance with one alternative.

Best practice

This case is a reminder of the importance of avoiding ambiguity when drafting contractual provisions. Whilst the existence of choice in a contractual provision does not necessarily make that provision unenforceable, the parties should be clear that it reflects the agreement between them, and that there is no doubt which party has the power to exercise the choice. In this case, the union negotiator gave evidence that he would not have agreed that Respondent's management could choose the pay increase option which was most advantageous for them. Therefore the hard fought negotiated pay deal was undermined by the drafting of the clause.

This case applies existing principles of construction of contracts, confirming that evidence of pre-contractual negotiations and the subjective intentions of the parties will not be admissible in order to assist with construction. Courts remain reluctant to interpret contractual provisions purposively and will not fill in the blanks where the drafted language appears ambiguous or nonsensical.

Allison Cook is a Senior Associate at Veale Wasbrough Vizards. She can be contacted on 0117 314 5466 or by This email address is being protected from spambots. You need JavaScript enabled to view it..