Secondary obligations

Suppose a clause in an employment contract stipulates that if an employee consistently fails to meet performance standards, the employer has the right to enact a performance improvement plan. Here, the duty to meet performance standards represents a primary obligation, while the implementation of the performance improvement plan would form a secondary obligation.

For example, in an employment contract, the primary obligation could be the duty of the employee to deliver a project within a stipulated deadline. If the employee fails to submit the project on time, a secondary obligation comes into effect, where the employer may enforce overtime hours or forfeit a part of the employee's salary as a penalty.

Consider a situation where an employee is contractually obligated to provide a month's notice before leaving their job. If they fail to do so, the employer might withhold a portion of their final salary as a penalty, thereby enforcing a secondary obligation. If the employee disagrees with this action, they might escalate this to a court or relevant labour tribunal. The enforcement process would then follow the legal procedures laid out by the jurisdiction, which could include court hearings, mediation, or arbitration.

In the real world, enforcement of secondary obligations can take many forms. Here are a couple of relatable instances.

Example 1: Negligence in safe working conditions An office worker regularly had to manage heavy boxes with files without suitable lifting equipment. One day, the employee incurred a back injury due to this repetitive and inappropriate lifting. Here, the secondary obligation was the employer's responsibility to provide a safe working environment. If the employee decides to sue, the court could look into whether reasonable steps were taken to uphold this obligation. If the employer was found negligent, they could be ordered to pay damages and rectify the working conditions.

Example 2: Breach of Confidentiality A former employee starts a rival business and uses customer lists illegally obtained from their previous job. The secondary obligation here is the employee's duty not to share confidential information. If the former employer sues for breach of contract, the court could grant an injunction to stop the ex-employee from using the customer list and award damages for any harm suffered.

Suppose a firm hired a professional speaker for a company event by contract. The secondary obligations clause specified the speaker had to refrain from using defamatory remarks. Nonetheless, the speaker deviated from the agreed script and made derogatory comments about the firm, causing reputational harm. Here, the firm could sue for breach of secondary obligations and claim damages for the loss suffered. The court, in this situation, could award damages to the firm based on the measurable harm incurred.

Case laws often provide compelling illustrations of theoretical concepts. Here are two case studies that exemplify how real-life courts have treated breaches of secondary obligations: Case 1: Robinson v Harman (1848) In this case, the plaintiff agreed to lease a property from the defendant. However, the defendant refused to complete the lease agreement. It was ruled that the plaintiff was entitled to consequential damages because the defendant's breach resulted in financial loss to the plaintiff, who had to lease another, more expensive property. Case 2: Hadley v Baxendale (1854) In this well-known case involving a broken crankshaft and a mill, the courts established the concept of 'reasonable foreseeability'. The court ruled that the defendant was not liable for the plaintiff's loss of profits because the defendant could not reasonably have foreseen this consequence at the time of forming the contract. This case serves as a precedent for considering consequential damages in breach of contract cases.

For instance, consider a product supply agreement where the supplier is obligated to replace the goods if found defective. If the buyer discovers faults in the products, their primary duty under the secondary obligation is to inform the supplier and not to sell the faults goods to third parties. Effectively, the duty of the buyer to act in good faith and diligently mitigate loss becomes crucial in such scenarios.

Consider a service agreement where a software developer is hired by a company to create a custom software program. If the developed software is full of bugs, the developer has a secondary obligation to fix these bugs. However, the company also has a primary duty to inform the developer about these issues in a timely and comprehensive manner so that the defects can be properly addressed.

Scenario 1: Employee Resignation without Notice Let's say an employee decides to quit a job without giving any prior notice as required by their employment contract. The employer, holding the right to withhold a part of the final settlement as stated under secondary obligations, exercises this right. Here, the employer fulfils their primary duty under the secondary obligation to mitigate the loss incurred due to the sudden vacancy.

Scenario 2: Renting a Faulty Property Imagine a tenant rents a property and soon discovers it's infested with pests. The secondary obligations clause in the lease contract obligates the landlord to provide pest control services. However, the tenant has a primary duty to promptly inform the landlord about the issue. Only by doing so can the landlord fulfil their secondary duties to mitigate the problem, showcasing an efficient handling of duties under secondary obligations.