Euro London Appointments Ltd v Claessens [2006] EWCA Civ 385 Court of Appeal

The claimant was an employment agency the defendant was a client of the agency looking for workers. The standard terms of the contract provided that the defendant would pay 20% of the annual salary for each client they introduced whom the client wished to engage. In the event that a client terminated the contract within 12 weeks of engagement the claimant would make a refund based on the amount of time worked. However, this refund was conditional upon the fees having been paid within 7 days of the invoice date. The defendant engaged two employees introduced by the claimant. Neither of them worked 12 weeks. The claimant commenced an action demanding full fees. The defendant argued they were entitled to a refund as the clause depriving them of the right to refund was unenforceable as a penalty.

Held

The clause was not a penalty as it was not payable on breach of contract.

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