A couple of weeks ago, I tweeted that “Last year, agency began introducing very tight deadlines. Last week, agency sent mass email about increase in missed deadlines. Coincidence?”. That is only half the story.
I gather this agency has quite ambitious plans for expansion. One tactic it seems to have adopted in the last year is to offer projects with fairly tight deadlines, of a kind requiring maybe 3,000 words per day to be churned out, rather than the 2,000 or so previously. Me, I just turn those projects down. Other people obviously don’t, and some of them are, according to a recent email, missing their deadlines. Tsk tsk.
The agency, not unreasonably, sees the need to address this issue. Somewhat less reasonably, it has opted to do so by sending out a take-it-or-leave-it (for “leave it”, read “never work for us again”) change to its terms and conditions, introducing a scheme of payment reductions for late delivery.
I mused awhile. Not about the unilateral introduction of new terms per se; I am of the view that any entity in a business-to-business relationship (including me, and indeed you), is entitled to suggest whatever it likes, as long as it’s legal, and to brook no negotiation if that’s the mood it is in. I nonetheless remain very much in favour of ongoing review and subsequent regulation of what is actually legal, however, so don’t go running away with the idea I’m some kind of cheerleader for unfettered capitalism and exploitation of the powerless, for I am not.
No, it is in fact the legality of such terms in general, and these new terms in particular although the hard figures have yet to be announced, that is causing the pensive expression and furrowed brow on yours truly. I vaguely recalled (or thought I did) that the English legal system takes a pretty dim view of penalty clauses, and with the agency referred to in the introduction being in France, I decided to bone up a bit on both legal systems.
The law of England and Wales makes a distinction between penalty clauses and liquidated damages (LD) clauses. If a contract clause is viewed as being mainly designed to deter poor performance (e.g. delivering late), it will be deemed a penalty clause, and penalty clauses are unenforceable (hurrah!).
However, if the clause is based on a reasonable pre-estimate of the losses that will actually be incurred if a breach occurs (I summarise various online resources in describing it thus), it is an LD clause and is enforceable.
How a translation agency could possibly judge such losses is anyone’s guess. For some work, the LD would be nil. For another document, it could potentially be thousands (e.g. if the agency were to lose the future revenue of a major end-client because of a late delivery by you). The LD figure for each translation project assigned would have to calculated and set separately for each project. (Let us skip merrily over the issue of the LD potentially being vastly more than the value of the translation commissioned.)
Otherwise, any sum stipulated in the general T&C to be paid as compensation to the agency for late delivery, be it a fixed figure or a percentage, would surely be viewed as a penalty clause, and therefore unenforceable.
However, I draw attention to four factors before you scamper insouciantly off to blithely disregard all deadlines from now on.
Firstly, if an agency (or any client) does actually incur a loss as a result of your late delivery, the remedy exists to seek adequate financial compensation because of your breach under general contract law. (And this regardless of the presence or absence of any “time is of the essence” stipulation.)
Secondly, there is the enforceability of the unenforceability, if you see what I mean. If you, after delivering late, casually send an invoice for the full amount, how likely are you to be battering down the doors of your local solicitor if an agency invokes a penalty clause and slices 20% (say) from it? The sums involved, much to our regret, are probably too paltry – we could doubtless earn more in the time taken to seek redress than the amount at stake. (Case law in the area of penalty clauses invariably involves multi-million pound yachts and astronomical football management contracts, for instance, not 200 quid corporate newsletter translations.)
Thirdly, natch, is the fact I’m not a lawyer. And fourthly, that is only the situation in England and Wales, and indeed the United States as far as I can tell without having analysed in great depth.
Hopping merrily across the channel, we find the position is much clearer and very different. In essence, the French Civil Code allows for penalty clauses. Article 1226 basically defines a penalty clause as English law does, as “designed to ensure performance”, with the key difference they are enforceable, unlike in England (and indeed the USA). Note that Article 1229 specifically mentions penalties for lateness.
This link explains the situation quite well for France (although the emphasis is on whether the court can alter the amounts involved) and also talks a little about Germany, Italy, the Netherlands, Poland and Spain. http://www.acc.com/legalresources/quickcounsel/jpold.cfm
Indeed, it appears that civil law countries are generally quite accepting of the idea, such as Russia here http://uk.practicallaw.com/4-504-3733
A fairly comprehensive review is here: http://www.reedsmith.com/files/Publication/e5e3e826-020f-4c4d-b5b1-ab1a8b50530f/Presentation/PublicationAttachment/085e07b6-e8f9-402c-b980-cc660a4956d2/0804crit.pdf, which is an ugly link but I wanted to keep them all transparent in this post – it is to Reed Smith, “The Critical Path”, Spring 2008; article on Liquidated Damages and Penalty Clauses – A Civil Law verses Common Law comparison. Includes interesting translation of dommages-intérêts in the context of Article 1152 as “liquidated damages”, and is well worth reading generally.)
From all of which I conclude that the agency email I mentioned at the beginning is entirely legit. You live and learn.