Carmichael and Another v. National Power Plc

The central legal question was whether an exchange of letters and subsequent conduct created a continuing contract of employment between the claimants and their employer such that they were entitled to written particulars under section 1(1) of the Employment Protection (Consolidation) Act 1978 (now section 1 of the Employment Rights Act 1996). The House of Lords held that the documentary language "on a casual as required basis" and the parties' subsequent conduct did not establish the irreducible minimum of mutuality of obligation necessary for a contract of employment to subsist when the claimants were not actually working. The Court therefore restored the industrial tribunal's finding that no contractual relationship existed outside periods of actual work. The decision emphasises (i) the requirement of mutuality of obligation for a contract of service, (ii) the proper approach to construction where documents are not intended to be an exclusive memorial of the parties' agreement, and (iii) the distinction between questions of law (construction of a wholly written contract) and questions of fact (terms founded partly on conduct and oral exchanges).

This case concerned two part-time tour guides who accepted an offer "to be employed . . . on a casual as required basis" and later worked intermittently for Blyth Power Stations. They sought written particulars of employment under section 1(1) of the Employment Protection (Consolidation) Act 1978 (see now section 1 of the Employment Rights Act 1996), asserting that the 1989 exchange of letters constituted a continuing contract of employment.

The procedural history was: an industrial tribunal found that the correspondence did not create any contract because of an absence of mutuality of obligation; the Employment Appeal Tribunal dismissed an appeal; the Court of Appeal by majority allowed the claimants' appeal; the employer then appealed to the House of Lords.

The issues framed were whether the 1989 documents amounted to a complete contract of employment and, if so, whether terms could be implied to ensure a mutual obligation to provide and accept work; and whether the matter was for the tribunal as fact-finder or for the courts as a point of law.

The House of Lords held that, on the evidence, the parties did not intend the letters to be the exclusive record of their relationship and that the tribunal was entitled to find that no mutual obligations existed when the claimants were not performing tours. The Lords rejected the Court of Appeal majority's construction which treated the documents as giving immediate contractual effect and implied terms by business efficacy to supply mutual obligations. The decision explains that where terms are to be gathered partly from documents and partly from oral exchanges and conduct, the ascertainment of the terms is a question of fact for the tribunal. The Lords therefore reinstated the industrial tribunal's decision that no continuing contract of employment arose from the 1989 engagement.

Appeal allowed. The House of Lords held that the industrial tribunal was entitled to find that the exchange of letters and the parties' subsequent conduct did not create a continuing contract of employment because there was an absence of the necessary mutuality of obligation; the Court of Appeal majority's construction and implication of terms was incorrect.

Industrial Tribunal: reserved decision 11 September 1995 finding no contract of employment; Employment Appeal Tribunal: appeal dismissed; Court of Appeal: appeal allowed ([1998] I.C.R. 1167) by majority (Kennedy L.J. dissenting); House of Lords: appeal by National Power allowed, restoring the industrial tribunal's decision ([1999] UKHL 47).