Many contracts contain notice provisions, some more detailed than others. Usually, we pay them little heed – glossing over them as "lawyer’s boilerplate". But times are different now. Disruption to workplaces and postal services means the approach your contract takes to notice provisions may determine whether you are protected or exposed. What are the pitfalls? And what can you do?
Much will turn on the interpretation of the clause in question. This is an objective assessment, for which the starting point will typically be the literal wording of the contract. However, as modern case law demonstrates, appropriate weight must also be given to the wider contract, the factual background and the "commercial purpose" of the contract or provision.
In each case, it is necessary to balance these potentially competing principles although, in recent years, the courts have advised against disregarding the literal wording of a contract in pursuit of business common sense. Where there are two or more plausible readings of a contractual provision, commercial common sense will not always prevail where the natural meaning of the language used is clear, even if the result has unfavourable consequences for one contracting party. So, how can you be certain of your obligations under the contract?
We recommend you check closely the precise wording and specific requirements of the notice clause, and be clear whether the requirements for service are optional or mandatory, particularly if you are considering whether the workaround we suggest below is a viable alternative for you.
What type of notice is required?
“Simple” notice: This includes contractual provisions such as “the Buyer must give notice of their intention to complete…”. If no specific method has been prescribed, such notice may in theory be oral, in simple written form, or by email. It is important, however, to be able to prove notice was given. If the recipient acknowledges it, there will be little doubt it will be effective, provided it otherwise meets the requirements in the contract. The notice must make it completely clear what is being notified.
“Formal” notice: This refers to notices such as ones prescribed by statute. The notice might have to be in a particular form, or with prescribed wording. Some bodies may be governed by a particular regulation (for example, notices by a regulator) that may or may not specify how and where it is to be served, including at the recipient's registered office, by post or by other means.
Under current restrictions, these requirements can be problematic where the registered office may now be a non-working location no longer receiving mail.
“Contractual” notice: Problems may arise in notice clauses in contracts that contain time-critical provisions. This may include the exercise of a break option in a lease; a put or call option in an investment; a claim for breach of a supply contract; or a claim for damages for a warranty claim in a corporate deal. Often, these will set out specific requirements, such as that they must be in writing and served by first class or recorded delivery post or personal delivery. Some contracts specifically exclude service by email. Older contracts may offer fax numbers that have now been disconnected.
Many contracts contain a "deeming" provision to the effect that a notice, if posted in accordance with such contractual requirements, is deemed served within 48 hours after posting (in the UK). You should check carefully whether the other provisions in the contract concerning service of notice must be complied with to the letter, or if there is flexibility.
What are the options if you cannot use postal services?
How you approach serving any notice will depend not only on the terms of the contract, but also the relationship you have with the other parties to the contract, and a healthy amount of common sense.
If email is not expressly prohibited, this format may be acceptable as a next best alternative under current lockdown arrangements, where postal or personal delivery is impractical.
However, do not assume it will be; while the courts have taken a more lenient approach to defects in service of some types of notices in recent years [1], the answer may depend on the purpose of the notice. If the notice is essentially to inform, rather than to change or end the contractual relationship between the parties, then the courts may be inclined to be more flexible [2].
A notice of rent review does not have the same impact as triggering a break clause in a lease, or notice of termination for breach where greater formality is likely to be needed. In the "hierarchy" of notice clauses, assessing whether the notice is “lower tier” or “higher tier” is not a precise science, so you must tread carefully.
Are there workarounds?
The relationship between the parties may be a critical factor. If there is no current dispute, now would be a good time to make contact (via email!) and reach agreement that, if there is a requirement to issue notices to any party under the contract, then regardless of what the notice clause says, these would be sufficiently served by email, with proof of sending, to specified recipient email addresses. Such an agreement could include an acknowledgement that any provision that requires written and signed variation to the contract will be deemed satisfied by email variation, or some other method such as an e-signing platform, if the parties have access to one and have agreed how its use will be verified to each other.
The circularity of such an arrangement should not be overlooked. Parties can agree between themselves to accept notices by email, even where the contract excludes this medium. However, if the initial request (sent by email, of course) is ignored, a subsequent email notice would technically be ineffective. The validity of the purported notice might then turn on subsequent actions of the parties, which in Scotland might involve questions of personal bar or, in England, estoppel.
Personal service, such as delivery in person or by sheriff officers (or, in England, bailiffs) is unlikely to be a viable alternative, with social distancing requirements or closure of premises rendering physical delivery out of the question.
Electronic service of documents: The Electronic Communications Act 2000 (ECA2000) adapted numerous areas of existing law to facilitate electronic service of documents, at first by fax, and latterly by email. The Supreme Court, in a 2018 decision [3] , acknowledged that ECA2000 was intended to "facilitate” the use of electronic communication, and upheld the service of a planning decision by email, despite the legislation setting out a prescribed way in which notice ought to be served. It should not be assumed however that service by email would always be upheld.
Remember also that, even if the parties agree to a more informal method of service, some types of notice (such as those prescribed by legislation) rely on a formal process for validity, for example, sending by recorded delivery post. Even if that process is not currently available, best advice is to follow the formal process, while at the same time considering an additional method (such as email) to be sure that the recipient of the notice is aware that it has been served.
George Frier is Head of Corporate at Shepherd and Wedderburn LLP and a member of the firm’s COVID-19 Advisory Group. For more information please contact him on george.frier@shepwedd.com or visit the dedicated COVID-19 advisory page
Ann Stewart is a Senior Professional Support Lawyer in Shepherd and Wedderburn's real estate team. For more information contact Ann on 0131-473-5380 or at ann.stewart@shepwedd.com
Alyson Shaw is a solicitor in Shepherd and Wedderburn’s property and infrastructure disputes team. For more information, contact Alyson on 0131-473 5695 or at alyson.shaw@shepwedd.com
[1] Mannai Investment Co Ltd v Eagle Star Assurance [1997] A.C. 749 (House of Lords) - even though a notice contained a mistake, it could still be valid where it was sufficiently clear and unambiguous that a reasonable recipient would be in no reasonable doubt about how it was intended to operate.
[2] Hoe International Limited v Anderson & Aykroyd [2017] CSIH 9 - notice of a potential breach of warranty under a share sale agreement was given to the sellers’ solicitors via the DX system, and not by registered post as prescribed by the contract.
[3] UKI (Kingsway) Ltd v Westminster City Council [2018] UKSC 67