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Beit Midrash Series P'ninat Mishpat

Chapter 85

A Retainer Contract Voided in the Middle of a Period

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P'ninat Mishpat (575)
Various Rabbis
84 - A Contractor’s Work That Was Stopped in the Middle
85 - A Retainer Contract Voided in the Middle of a Period
86 - A Sale with out a Signed Agreement
Load More
A non-profit organization (=def) hired an advertisement agency (=pl) to prepare different publicity projects on a "retainer" basis, whereby def pays a set fee for six months irrespective of the amount of time pl puts into the project. Things worked smoothly for two months, with pl primarily learning about def’s operations and the target group of the campaign. Pl’s director traveled abroad for two weeks during the third month, leaving his staff instructions how to proceed with the project. At that time, def needed an immediate publicity product. Pl’s staff put in many extra hours to get it done, thereby harming its reputation by being late on other projects. The work pl did for def would have been done in any case, but it was scheduled to have been done later. Def was unsatisfied with the work and ended the contract with two weeks notice, as their contract allowed. Pl demands extra payment for the work they did at an accelerated pace, as the work was not within the realm of normal according to the contract. They estimate the work as two and a half months work. Def responds that the work was to have been done anyway and that since def were unhappy with the project, they never received anything of value. Therefore, they demand a return of the payment for the first two months.

Ruling: Although the work pl did on def’s behalf would have taken place in any case, the accelerated pace that was demanded makes it unusual work that went beyond the contractual obligation. After all, they were allotted six months to do the work, and def demanded to have it done in the third month.
On the other hand, the deliberations in court make it evident that had def not opted out of the contract, pl would not have demanded extra pay. Therefore, one might claim that pl relinquished rights to demand extra payment. However, this is incorrect because pl agreed to push forward the work only based on the assumption that they would be paid for six months of work. Def cannot win on all sides by making pl do six months work in just over two months and then fire pl so that he is paid for only two months. However, beit din rejected the manner in which pl determined the value of the work it provided during that time and entitled them to extra pay of two weeks according to the rate as found in the contract.
Def claimed that they received no benefit from the first two months of work, which were essentially only preparatory, considering that a final finished product was never used. Beit din rejected the argument. It is only appropriate that preparatory work be done, and it is not pl’s fault that def decided not to allow pl to finish the period of time covered by the contract.
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