Withdrawing a job offer can amount to breach of contract: Kankanalapalli v Loesche Energy Systems Ltd

Schools regularly make job offers that are conditional on pre-employment checks such as references, right to work verification and DBS clearance. A recent Employment Appeal Tribunal (EAT) decision provides an important reminder that withdrawing such an offer can have significant legal and financial consequences, even where those checks haven’t yet been completed.

In Kankanalapalli v Loesche Energy Systems Ltd, the EAT held that withdrawing a conditional job offer shortly before the proposed start date breached the contract, entitling the claimant to three months’ notice pay as damages.

Background

The claimant was offered a Project Manager role with Loesche Energy Systems Ltd. The offer letter set out key terms including salary, working hours, start date and a £3,000 relocation contribution. The offer was stated to be subject to satisfactory references, a right to work check and the successful completion of a six-month probationary period.

The claimant accepted the offer by email, stating, “Please take it that I accept the offer,” to which the employer responded, “That is excellent news and we look forward to you joining us.” The claimant subsequently provided reference contact details and right to work documents and made significant relocation arrangements, including booking international travel and securing long-term accommodation.

However, before the proposed start date, the employer withdrew the offer, stating that it was no longer able to offer the position due to project delays.

The claimant brought a claim for breach of contract.

The Employment Tribunal (ET) dismissed the claim, finding that the references and right to work check were conditions precedent, that is, requirements that had to be satisfied before any binding contract could come into existence. As these hadn’t been completed, the ET concluded that no contract had been formed.

Appeal

The EAT disagreed with the ET and upheld the appeal.

The central issue was whether the conditions in the offer letter were ‘conditions precedent’ (preventing a contract from forming until they were met) or ‘conditions subsequent’ (meaning the contract was already formed but could be terminated if the conditions were later not satisfied).

The EAT found that the conditions were conditions subsequent. It placed particular weight on the fact that the offer letter set out the key contractual terms, that onboarding documentation had been prepared for the claimant’s first day and that the referee form used the wording, “my employment may be terminated without… satisfactory references”, which presupposed the existence of a contract.

Furthermore, the three conditions – references, the right to work check and probationary period – were grouped together in the offer letter. Since the probationary period could only logically operate after a contract had commenced, the EAT held this indicated that the other two conditions should be interpreted similarly.

Importantly, the employer hadn’t withdrawn the offer because the claimant failed to satisfy the pre-employment conditions. Rather, the withdrawal was driven by the employer’s own project delay. This meant the employer couldn’t rely on the conditions to justify the withdrawal.

A binding contract had therefore been formed when the claimant accepted the offer. As no notice period had been agreed, the EAT held that it was necessary to imply a term of reasonable notice. The EAT also rejected the argument that, because the claimant had less than one month’s service, no notice was required.

Taking into account the seniority of the role, the international relocation involved, the length of the recruitment process and the employer’s own encouragement for the claimant to secure a 12-month rental, the EAT concluded that three months was a reasonable notice period and awarded damages accordingly.

Key takeaways for schools

This case offers several important lessons for schools when recruiting staff:

1. An accepted offer can create a binding contract before the start date. A binding contract may arise as soon as a candidate accepts an employment offer, even before they start work. Schools should therefore treat the withdrawal of an accepted offer as a contractual termination and give the required notice
2. Standard pre-employment conditions may not prevent contract formation. Requirements such as satisfactory references, DBS checks and right to work checks may be treated as conditions subsequent, rather than conditions precedent. Describing an offer as ‘conditional’ or ‘subject to’ those checks will not, on its own, necessarily prevent a contract from arising. If schools intend that no binding contract should exist until specified checks are complete, the offer letter should say so clearly
3. Include a clear notice clause in offer letters. The lack of an express notice period in the offer letter was a key weakness in this case. In its absence, a common law term requiring reasonable notice may be implied, which can exceed the statutory minimum, particularly for senior appointments. Schools should review their template offer letters to ensure they include a clear notice clause setting out the notice required from both parties
4. Consider including express wording such as “No contract of employment shall come into existence unless and until all pre-employment checks have been completed to the school’s satisfaction”, rather than simply stating that the offer is ‘subject to’ those checks
5. Be mindful of conduct during the recruitment process. Statements made during recruitment, including encouragement to relocate, offers of relocation support or references to long-term accommodation, may affect the implied notice period and increase potential damages. Schools should recognise that candidates may rely on such assurances when making significant personal and financial commitments.