Be sure your contract delivers what you want

Lawyers report a rise in cases where GP clients are not fully up to speed about fundamental aspects of contracts. Justin Cumberlege and Sophie Birkbeck run through the basics of making one – and what to consider when subcontracting.

With GP federations and PCNs seeking more contracts and becoming involved in multi-neighbourhood providers and integrated health organisations, sub-contracting is set to be increasingly common.

Contracts do not have to be written agreements – they are also created verbally or by custom and practice. And be aware that existing contracts may be changed verbally and by custom and practice, sometimes inadvertently.

All that is required to create a binding contract is:

1. An offer – one party must make a clear offer to another, for example when one offers to buy a product or some services from another.
2. Acceptance – the party receiving the offer accepts it explicitly or by its actions.
3. Consideration – there must be an exchange of something of value, for example money is offered for the product or services.
4. Intention – the parties must intend the agreement to be legally binding. Courts presume this in commercial circumstances.

It is always best to have the agreement in writing so everyone understands their rights and obligations. This often makes people think through the service to be provided and ‘what if’ scenarios.

They may also decide to include a provision that contract terms may only be varied in writing, so there is no change by a verbal agreement or by custom and practice.

Contract terms should cover the price being paid, the term of the contract where a service is being provided, termination provisions, and the obligations of all the parties to the agreement.

Also consider an escalated dispute resolution procedure, requiring the parties to seek a resolution before starting expensive court or arbitration proceedings.

There are fundamental points to remember when entering into a contract. The key is – who is the contracting party? Is it a legal entity or an unincorporated association of different people?

For example, a unit of an NHS Trust or a research project may want to contract with other parties to assist them, but neither a unit of an NHS Trust nor a research project are legal entities.

It is essential to identify the legal entity. A partnership is not one. It is a number of people carrying on a business together. A PCN is an unincorporated association usually made up of a number of GP partnerships.

Neither the partnership nor the PCN are separate legal entities, so technically they are unable to enter into contracts in their own name. Instead each partner is entering into the contract, even if the contract is signed by one partner as an agent for all of them.

Each partner is an agent of the whole partnership and they have the power to bind themselves and the other partners. Each partner also has unlimited liability. So if a contract is breached, each partner could be liable for the full contract value, even if they did not personally sign the contract.

This is why it is important for partners to have a partnership deed clearly setting out the rules on entering into contracts. For example, sometimes you will see there is a financial limit on the contract value any one partner can enter into without the consent of the others.

Unincorporated PCNs have a similar issue and could also potentially bind every partner of its member practices to the contract if one person, such as the clinical director, enters into a contract in the name of the unincorporated PCN. The network agreement should set out the rules.

As a result of this, PCNs often consider incorporating a service company. Not only does this limit their members’ liability; a company is able to enter into a contract in its own name.

If contracting with a company, and the company breaches the contract, the liability of the shareholders of that defaulting company are limited to the amount they paid for their shares.

If the defaulting company is failing financially, you will have no recourse against the shareholders, or the directors (unless they have acted outside of their powers), so it is always important to check the value of the company to ensure that it is able to meet their obligations.

For this reason companies are required to publish their accounts by filing them at Companies House, where they are a historical record.

Subcontracting

Some contract tenders by ‘head contractors’ are for goods and services which a specific entity (the ‘intermediate contractor’) cannot provide itself under the head contract, so it needs to subcontract all or some elements to subcontractors.

But some head contracts prohibit subcontracting, or place certain conditions, such as obtaining the consent of the head contractor. So if you intend, as an intermediate contractor, to subcontract all or part of the contract, check the terms first or obtain consent at the outset.

When entering a subcontract consider:

• If the subcontract terms mirror those of the head contract. Do they make sense considering the circumstances of the intermediate contractor and the subcontractor? For example, should further subcontracting or alienation be prohibited?
• Will there be similar termination provisions? Should the termination provisions provide that the subcontract terminates upon the head contract’s termination automatically? The subcontractor will want to ensure sufficient notice is given.
• Check the notice period for no-fault termination. Usually this would be less than the notice period required under the head
  contract so if the head contractor serves notice of termination, there is time to make the arrangements to serve notice on the subcontractor.
• Should the subcontractor pay additional damages in the event of a breach to cover the losses of the intermediate contractor under the head contract?
• What services will be subcontracted? If it is not a complete pass through of all services or self-contained specific set of services, absolute clarity is needed about what services each party provides. Ensure there are no gaps.
• Consider the obligations on the intermediate contractor under the head contract, and which of them need placing on the subcontractor. For example, are there any governance obligations? Are there mandatory policies noted in the head contract that must be adhered to by the subcontractor?
• How will the subcontractor be paid? Any payment to the subcontractor should be explicitly subject to the intermediate contractor receiving payment under the head contract first. If for any reason there is a payment delay under the head contract, should the intermediate contractor still be obliged to pay the subcontractor?
• Is the subcontractor required to report to the head contractor regarding the services being provided under the subcontract during the term of the agreement?
• Will any employees be transferred to the subcontractor? If so, you may need to consider the TUPE regulations before commencing the subcontract, and when it ends. Other important clauses to consider, as with any other contract, include:

Data protection

Will the parties be processing or controlling data? All sub-processing arrangements are prohibited unless the other party to the head contract (the data controller for UK GDPR purposes) has given its prior written general or specific consent.

The intermediate contractor must enter a sub-processing agreement with the subcontractor imposing the same data protection obligations on the subcontractor as are imposed on the intermediate contractor under the head contract.

This is essentially a requirement to ‘flow down’ the data processing terms in the main contract to the subcontractor.

The GDPR makes the head contractor fully responsible to the other party for the subcontractor’s performance of its sub-processing obligations. There may be a need for a data sharing agreement between the head contractor and the sub-contractor.

Confidentiality

This should mirror the head contract’s terms to ensure the subcontractor is subject to the same obligations.

The standard form of NHS contracts have standard forms of subcontract, but many of the issues need thinking through and reflecting in the schedules. If the subcontractor’s staff are to benefit from NHS pensions, then the NHS standard forms will almost certainly be required.

First published in AISMA’s Winter 2026 edition. 

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