Drafting of hairdresser agreement

Further to our recent discussion and the instruction from Mr. Jacky Lam contained in the email dated 2nd October 2009, I will explain the identified issues and suggest the relevant drafting in this email with reference to the precedent agreement.

Non-competition Clause

Our Client would like to introduce an additional clause in the Agreement prohibiting Jenny Ho from working as a hairdresser at Central within 6 months after the termination of the Agreement.

In order for this kind of restrictive clause to be enforceable, it must be reasonable as between the contracting parties, and in the light of public interest. In determining reasonableness, the test is whether it is necessary to protect some legitimate interest (Herbert Morris v Saxelby [1916] 1 AC 688, Natuzzi Spa v De Coro LTD [2007] 3 HKC 74).

However, Our Client has his salon in Causeway Bay while the non-competition clause is in relation to Central. Subject to any information or reasons unknown to us, the clause is not advisable in my view and the location Central should be replaced by Causeway Bay.

Nevertheless, the originally intended non-competition clause will still be drafted hereinunder for the purpose of further discussions or amendments.

10.18 Non-competition

The Hairdresser shall not render any services as a hairdresser at [Central] for a period of six calendar months immediately after this agreement is terminated, expired or frustrated for whatever reason. This clause shall survive expiry or termination of this agreement.

Clause 7 Status of the Hairdresser

Clause 7 stipulates that the Hairdresser works as an independent contractor and not the servant, which means employee, of Our Client. As a consequence, the Hairdresser does not enjoy any potential benefits as an employee in the Employment Ordinance and the Employees’ Compensation Ordinance, and Our Client bears no such burdens.

It is worthy to note that the clause only reflects parties’ intention and is by no means conclusive, the Court will consider, under all relevant circumstances, whether the person is performing the services as a person in business on his own account (Lam Sik v Sen International Ventures LTD [1994] HKC 405). However, for the purpose of drafting, it is to the advantage of Our Client.

Severance Clause

A severance clause operates when part of the agreement is found to be void or voidable. It severs the part in question from the agreement, leaving the remainder as a intact and enforceable contract on its own. It may also specify the remainder being interpreted using the parties’ original intent and that the parties are entitled to termination if the severance is so extensive so that the remainder can no longer fundamental purpose of the agreement. It is necessary to prevent the agreement as a whole to be held void or voidable, and it tries to keep the parties’ original intent.

Communication through Electronic Mails

To provide an alternative means of communication through electronic mails under the Agreement, clause 10.10 and 10.9 should be amended. The amendments are marked up and shown below.

10.10 Notices

Any notice to be served on either of the parties by the other shall be sent by prepaid recorded delivery or registered post to the address of the relevant party shown at the head of this agreement or by facsimile transmission or by telex or by electronic mails to the electronic mails address of the relevant party shown in this clause and shall be deemed to have been received by the addressee within 72 hours of posting or 24 hours if sent by facsimile transmission or by electronic mails to the correct facsimile number or the correct electronic mails address of the addressee.

Subjected to any subsequent change under clause 10.9, the Hairdresser’s electronic mails address is [Hairdresser’s email address] and the Salon Owner’s electronic mails address is [Salon Owner’s email address].

10.9 Change of address

Each of the parties shall give notice to the other of the change or acquisition of any address or telephone telex or similar number or electronic mails address at the earliest possible opportunity but in any event within 48 hours of such change or acquisition.

Additional Suggestions to Protect Our Client

The first suggestion is to add an indemnifying clause as drafted below. This clause would, as between the Hairdresser and Our Client, attribute the liability to compensate third party loss in respect of any fault by the Hairdresser to the Hairdresser, and make sure that any such out-of-pocket compensation made by Our Client is recoverable against the Hairdresser, either by way of a separate claim of set off.

[10.19] Indemnity

The Hairdresser shall indemnify the Salon Owner against all claims, liabilities and expenses in respect of any fault by the Hairdresser, including without prejudice to the generality of the foregoing, breach of this Agreement or any other contracts, negligence and other torts, and breach of any statutory provisions or regulations. The Salon Owner is entitled to deduct such amount in the commission payable to the Hairdresser under clause 5.1. This clause shall survive expiry or termination of this agreement.

Another suggestion is to include a clause to prohibit the Hairdresser to render personal services outside during the term of the Agreement. This clause may prevent any potential conflict arising from the Hairdresser having more than one engagement contract, and hopefully the Hairdresser would not be exhausted during periods spent at the Salon.

[10.20] Restriction of Engagement

Throughout the Term the Hairdresser shall not engage in any other contracts to provide personal services unless pursuant to this Agreement or having the written consent by the Salon Owner.

Finally, a clause may be included to stop the Hairdresser from giving personal contact or advertisements to any customers of the Salon. This may stop the Hairdresser personally to compete with the Salon for customers.

[10.21] Restriction on Communication to Customers

Without the consent of the Salon Owner, the Hairdresser shall not give personal contact to or advertise to any Salon customers.

These are my observations and opinions in relation to the Agreement.