When conditional offers become binding

James Cairns, Solicitor

The Employment Appeal Tribunal’s (EAT) decision in Kankanalapalli is a timely reminder that a “conditional” offer does not always prevent a binding contract from arising.

In Kankanalapalli v Loesche Energy Systems Ltd, the EAT held that an accepted offer of employment had created a binding contract, despite the offer being expressed as conditional. As the Employer withdrew the offer without notice for a reason unrelated to those conditions, it was found to be in breach of contract and had to pay damages equivalent to three months’ notice, despite the offer being silent on notice.

Background

Mr Kankanalapalli was offered a project manager role in September 2022. The offer letter set out the proposed start date, salary, hours, benefits and job description, and was expressed to be “subject to receipt of satisfactory references, a right to work check and a successful six-month probation period” which would commence on the start date. He accepted the offer and then completed onboarding steps, including providing referee details and right-to-work documents.

Before the intended start date, the employer told him that because of a delay to the commencement of the relevant project, it could no longer offer him the role. Mr Kankanalapalli brought a breach of contract claim on the basis that the offer had been withdrawn without notice.

The EAT’s decision

The tribunal originally dismissed the claim, finding that no binding contract existed because the offer remained conditional.

The key question was whether the stated conditions were conditions precedent, preventing a contract from arising until satisfied, or conditions subsequent, allowing a contract to exist but making it terminable if the conditions were later not met. The tribunal treated them as conditions precedent and, as they had not been satisfied, held that no binding contract existed. The EAT disagreed.

The EAT held that there is no presumption that conditions attached to an offer of employment prevent contract formation. The question is one of construction. Here, the overall wording pointed strongly to an immediately binding agreement: the employer sought acceptance first, the documentation assumed an ongoing employment relationship capable of later termination (including reference forms and new start documentation containing express declaration contemplating termination if the conditions were later not met), and, most significantly, a probationary period which could only operate after employment had begun, since it cannot be satisfied prior to contract formation.

The conditions were grouped together in the same part of the offer letter, with no indication that some were intended to prevent a contract from arising at all. That meant a binding contract existed once the offer was accepted.

The employer was therefore not free to withdraw the offer for any reason it chose. It could terminate if one of the stated conditions was not met, but it could not simply pull the offer because business circumstances had changed.

As the offer letter said nothing about notice, the EAT implied a term requiring reasonable notice. On the facts, three months was appropriate, and the EAT considered:

• The seniority of the role;
• The level of remuneration;
• The length of the recruitment process;
• The fact that remuneration was expressed annually; and
• The employer’s own position that the role ordinarily attracted three months’ notice outside probation.

Why this matters in practice

Many employers assume that marking an offer “subject to references” or “subject to right to work checks” means there is no contract until those steps are complete. This decision shows that the position is not that straightforward.

If the overall wording suggests the parties intended to be bound immediately, the contract may already be in place, even if some checks are still outstanding.

The risk is heightened where the offer letter includes key contractual terms and the employer begins onboarding activity before the start date. If the business later decides not to proceed for commercial reasons, withdrawing the offer may amount to a dismissal in breach of contract rather than a simple retraction of a non-binding offer.

Key takeaways for employers and HR teams

• Review offer letter wording carefully and state expressly whether checks are conditions precedent to contract formation or grounds for later termination.
• Include a clear notice provision in the offer letter itself, especially where the full contract will only be issued after acceptance.
• If a shorter notice period is intended to apply during probation, say so expressly rather than assuming it will be implied.
• Treat late-stage withdrawals with caution, particularly where the reason has nothing to do with the stated conditions.

Conclusion

This decision is a useful prompt for employers to revisit their recruitment documentation and onboarding processes. Clear drafting at offer stage can significantly reduce the risk of unexpected notice liabilities if plans change before a new recruit starts work.

For further assistance, please contact our employment team on 0161 832 3434.