| Commentary

(1) Consensual termination

| Commentary

B.     Termination by agreement

(1)     Consensual termination

The parties having agreed to make a contract can at any time agree to unmake it; each may agree to release the other from further performance, and the contract is thereby discharged. The courts will, however, be slow to find that the contract has been terminated in that way unless the evidence is clear that it has because the employee's statutory rights to redundancy payments and to compensation for unfair dismissal depend upon the employee being dismissed as defined in the ERA 1996, and consensual termination is not 'dismissal'.

Frequently, an employee will contend that a mutual agreement to terminate the contract was preceded by a threat of dismissal. If satisfied that the employee was told 'resign or be dismissed' then this will be construed as a dismissal. For such a construction to apply, the operative cause of the agreement must be the threat of dismissal and not the promise of financial or other inducements: see Sheffield v Oxford Controls Co Ltd [1979] IRLR 133, [1979] ICR 396. It was held that the financial inducements rather than the threat of dismissal were the operative cause of the employee's departure and that he had resigned.

In Catherall v Michelin Tyre plc [2003] IRLR 61, EAT, the employee was offered a choice between redundancy or early retirement on medical grounds, and this was therefore only a choice as to the terms on which he was

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