The Employment Appeal Tribunal (EAT) in Kankanalapalli v Loesche Energy Systems Ltd has given an interesting judgment on the legal effect of the relatively common problems caused by the withdrawal of a “conditional” job offer before actual commencement of employment. The decision emphasises the distinction between conditions precedent and conditions subsequent, and confirms that employers may be required to give reasonable notice even where employment has not yet begun.
Background to the case
Mr Kankanalapalli was offered a project manager role by Loesche Energy Systems Ltd in September 2022, subject to satisfactory references, a right to work check and completion of a probationary period. He accepted the offer by email and took steps to prepare for the role, including providing onboarding information and documentation. Before his scheduled start date, the employer withdrew the offer due to project delays, unrelated to any failure to meet the conditions.
Mr Kankanalapalli brought a breach of contract claim, arguing that the offer had been withdrawn without notice.
The Employment Tribunal’s decision
The Employment Tribunal accepted that Mr Kankanalapalli had validly accepted the offer by email, despite not following the exact format requested by LES Ltd. However, it concluded that no binding contract had come into existence because the offer was subject to conditions which it characterised as conditions precedent to contract formation. As those conditions had not been satisfied at the point the offer was withdrawn, the tribunal held that LES Ltd was entitled to withdraw the offer without giving notice.
The appeal
The EAT overturned that decision. It held that the tribunal had failed to consider whether the conditions were instead conditions subsequent – meaning a contract had already been formed but could be terminated if the conditions were not met. On the facts, the EAT concluded that a binding contract had arisen on acceptance. This was supported by the offer letter setting out key terms, the employer’s preparatory steps, and wording indicating that employment may be terminated if references were unsatisfactory, rather than no contract existing until they were received. The three conditions were grouped together, with no clear distinction drawn between pre-conditions to contract formation and ongoing contractual requirements.
Importantly, the offer was withdrawn for project-related reasons, not because Mr Kankanalapalli had failed to satisfy the conditions. As a result, the withdrawal amounted to termination of an existing contract, not revocation of an offer.
Implied term of reasonable notice
The EAT also rejected the tribunal’s finding on notice.
As there was no agreed notice provision applying prior to the start date, the EAT implied a term of reasonable notice. Taking into account the seniority of the role, the length of the recruitment process and the requirement for relocation, it held that three months’ notice was reasonable, even though the employment had not yet commenced. The employer’s failure to give notice was a breach of contract, and the EAT awarded three months’ notice pay.
Practical implications for employers
This decision highlights that labelling a job offer as “conditional” will not necessarily prevent a binding contract from arising. References and right to work checks may operate as conditions subsequent, rather than preconditions to contract formation, depending on the wording and structure of the offer. Employers should therefore be cautious when withdrawing offers for commercial or operational reasons, as this may amount to termination requiring notice.
To mitigate risk, employers should make clear whether conditions are intended to delay contract formation or merely permit termination, and ensure that express notice provisions are agreed at the outset. As this case illustrates an expressly agreed notice provision, particularly where there is a probationary period with a short probationary break provision, will assist the employer in negotiating a more cost effective settlement.
Takeaway from the case
Kankanalapalli v Loesche Energy Systems Ltd confirms that employment contracts – technically, contracts foremployment as opposed to contracts of employment – can come into existence well before the first working day and that employers may be required to give reasonable or the expressly agreed notice in the contract of employment , when withdrawing an accepted offer. The judgment reinforces the need for precision in drafting conditional offers and highlights the risks of assuming that a contractual relationship has not yet begun.
