The Employment Appeal Tribunal case Kankanalapalli v Loesche Energy Systems Ltd EAT 49 concerned a breach of contract claim following the withdrawal of a job offer.
The central legal dispute was whether an employment offer made ‘subject to’ certain conditions created a binding contract upon acceptance (its legal term known as ‘condition subsequent’) or if the contract only came into existence once those conditions were fully satisfied (its legal term known as a ‘condition precedent’).
What Happened
Mr. Kankanalapalli (the claimant) applied for a Project Manager position with Loesche Energy Systems Ltd (the respondent). On September 23, 2022, the respondent issued an offer letter via email for a start date of November 1, 2022. The letter stated the offer was ‘subject to receipt of satisfactory references, a right to work check and a successful six-month probation period’.
The claimant accepted the offer via email on September 26, stating, ‘Please take it that I accept the offer,’ which the respondent acknowledged as ‘excellent news’. By October 6, the claimant had provided his referee details and copies of his right-to-work documents. However, on October 7, the respondent informed the claimant that a delay in their own ‘notice to proceed’ on a specific contract meant the role would not start until January 2023. Shortly after, on October 11, the respondent withdrew the offer entirely due to the project delay.
The claimant brought a claim for breach of contract, arguing the offer was withdrawn without appropriate notice. The original ET dismissed the claim, finding that because the references hadn’t been received and the original right-to-work documents hadn’t been physically inspected, the offer remained conditional and no binding contract existed.
The claimant appealed the original Employment Tribunal ruling.
Ruling
The EAT ultimately overturned the initial Employment Tribunal (ET) decision, ruling in favour of the claimant, confirming that a binding contract had been formed and that the employer was liable for failing to provide reasonable notice.
The EAT’s findings included:
- The EAT determined that the conditions in the offer letter were ‘conditions subsequent’ not ‘conditions precedent’. These are two legal phrases; the latter is when events must occur before a contractual obligation or duty arises, whereas ‘conditions subsequent’ are events that occur after a contract is in force.
- In this case, the Judge noted that the offer letter contained all key terms (salary, start date, etc.) and, importantly, grouped the probationary period, which can only occur after employment starts, with the references and right-to-work checks. This therefore implied that these were grounds for terminating an existing contract, and not barriers to forming one.
- The contract was binding but silent on a notice period, however under UK law, there is an implied term of notice which requires an implied term of ‘reasonable notice’.
- The EAT rejected the respondent’s argument that notice should be zero or one week. Given the seniority of the Project Manager role, the lengthy interview process, and the fact the claimant was expected to relocate, however, the EAT ruled that three months constituted a reasonable notice.
- The respondent was found in breach for terminating the contract without this three-month notice period and was ordered to pay the claimant accordingly for breach of contract.
Learnings for Employer
- Clarity in offer letters: Employers must be explicit if they intend for a contract to only exist after conditions are met (precedent) versus forming a contract that can be terminated if conditions aren’t met (subsequent). Using ‘subject to’ is not enough to guarantee an unrestricted right to withdraw.
- The ‘probation’ trap: Grouping pre-employment checks like references, with a probationary period in the same clause can lead a court to view all of them as conditions subsequent, meaning a binding contract is formed the moment the offer is accepted.
- Explicit notice periods: To avoid the uncertainty of ‘reasonable notice,’ employers should specify the notice period applicable before the start date and during the probationary period within the initial offer letter.
- External factors: A delay in a business project (such as a ‘notice to proceed’) does not automatically grant an employer the right to rescind an accepted job offer without notice unless that specific contingency was a clearly stated condition of the offer.
- Reasonable notice for senior roles: Courts will look at the seniority of the post, the duration of the recruitment process, and the impact on the candidate (e.g., relocation) when determining ‘reasonable notice,’ which can significantly exceed statutory minimums.
