Lots of commercial contracts contain important, but often overlooked, provisions regarding notices. They will typically prescribe how notices must be sent, by whom and to whom they must be sent, what they must contain and when they will be deemed to have been received.
Whilst often considered boilerplate provisions in a contract, failing to comply with their requirements can have very serious consequences.
Thinking of terminating or varying the terms of a contract?
If you want to terminate a contract, renew or extend it, or vary its terms, it is likely that you will need to comply with contractual notice provisions. If you fail to do so, the purported termination, extension or variation will be ineffective. The ramifications of that could be substantial.
By way of examples:
- you may want to terminate a contract at the end of a minimum term. A failure to serve proper notice may mean that you become legally obliged to continue with the contract for a further minimum term, notwithstanding that you may already have signed up to another supply contract in the meantime;
- you may want to serve notice on a customer to increase your prices and only have a specific time period in which to do so. A failure to serve proper notice will leave you stuck with your existing prices;
- you may be obliged to serve notice of a claim upon a counterparty by a particular date. A failure to serve proper notice may leave you unable to pursue your claim and, therefore, without a remedy;
- you may believe you are serving a notice on the last day for doing so, but the deemed service provisions in the contract mean that it will not be deemed served until two business days later – i.e. beyond the end of the relevant time period; and
- you may send notice to the trading address of your customer, ignorant of the contract requiring notices to be sent to its registered office.
Should I check my commercial contracts?
If you have any commercial contracts in place, I would encourage you to check the relevant notice provisions before looking to exercise a contractual right. Where exercising a right involves serving a notice, it is vital that the notice provisions in the contract are checked and are fully complied with. Courts will not override what commercial parties have agreed in their contracts, regardless of any perceived unfairness in the outcome. If a contract requires a notice to be served on blue paper, serving a notice on red paper will not suffice (and that principle derives from a court judgment!).
In certain cases, a failure to comply with contractual notice requirements can be remedied by serving the notice correctly. However, that will not always be possible – e.g. where notice is being served up against a deadline. There may not be time available to cure a defective notice. Where notices are time-critical, it is imperative that they are served correctly first time.
A final word of warning: lots of commercial contracts exclude the ability to serve notices by email. That may come as a surprise to many, particularly given that email is undoubtedly the most common form of communication between parties in the business world. However, you will not be able to rely upon modern working practices if you have failed to comply with what the contract requires.
If you are in any doubt as to what you need to do to comply with a contractual notice provision, it is vital that you seek legal advice as soon as possible.
