"Help: our contract has expired but we are still working - what happens"

I’ve had a couple of queries from clients recently about their options when a contract expires, but everything carries on as before.

Typically there are 3 concerns when this surprisingly common state of affairs happens:

  • Do I still get paid?
  • Am I still protected under the terms of the contract?
  • How much notice do I, or the other party, need to give to terminate the contract?

There are normally three options which apply in this situation:

1. A very basic contract

In this scenario the law assumes that there is now a very basic contract in place, which states:

We will buy x number of products or buy y  amount of services from you.

Both sides can terminate the contract with reasonable notice

There will not be any other terms and conditions to the contract other than those that might be implied by statute or by custom and practice. So, for example, any carefully negotiated limitations of liability that there might have been in the now-expired contract will not be effective.

2. The contract has been extended

As all the parties have carried on working to the terms of the expired contract, it is assumed that everyone has implicitly agreed to an extension of the contract. Therefore, the terms of the expired contract remain in place. The notice period will either be as in the terms of the expired contract or if none, on “reasonable notice”.

3. There is no contract now in place

This 3rd option is relatively rate. Effectively it means that as a service provider, you are working at your own risk. The customer would be under no obligation to pay you for the work you have done unless you are able to successfully argue the doctrine of quantum meruit. This arcane latin legal terms essentially means that you can invoice, and the customer should pay, a reasonable value of the services provided - but this is unlikely to include any profit margin. In this situation it is unlikely that your customer will stop paying you for the service or product you are providing.

In summary,

In this situation it is very understandable that you may not want to rock the boat and make your customer aware that the contract needs to be renewed. However, given the potential risks you are facing it is always worth having the conversation to make sure that both you AND your customer have the proper legal protection in place.