Monica Ross

Spring clean your business: dust off those notice clauses

Most commercial contracts contain a formal notice clause. This clause normally sets out: 1) who you should address notices under the contract to, 2) where they should be sent and 3) how they should be delivered.

As this is a boilerplate clause which is usually found at the end of a contract, it can be easily overlooked.

This is a good time to review the notice clauses in your contracts so that you know what you need to do if you have to serve a notice, and make sure that you seek legal advice if you have any queries.

Types of notices

The type of notice you can serve depends on the nature of the contract. Examples of typical notices are termination notices, break notices, notices of warranty claims, or notices that an agreed dispute resolution procedure should be commenced.

The first two examples have the effect of bringing the contract to an end, whereas the latter two are more informative. Generally, the more drastic the consequences of a notice, the greater the need for strict compliance with the notice clause.

However, it is important for you to fully comply with the notice clause regardless of the nature of the notice. If you don’t do so, a court could find that the notice wasn’t properly served and therefore, using the first two examples, the contract or lease wouldn’t have been terminated.

Here are our top five tips to bear in mind when serving notices, based on real life case studies.

Top tips

1 – Serve the notice on the contracting party, not its agents

A notice should have been sent to a company at its registered office, but instead it was sent to the company secretary and director at his home address. This wasn’t validly served as it wasn’t sent to the company.

2 – Serve the notice on the right entity

A tenant served a break notice on the parent company of the landlord. Although this was sent to the correct registered office, this was not valid as it wasn’t sent to the landlord.

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3 – Make sure that the name of the recipient is correct

A notice was addressed to an abbreviated and erroneous version of the other party’s company name, rather than the full name. The court decided that this went beyond the obvious misspelling of its name, and declared the notice invalid because it wasn’t addressed to the contracting party.

4 – Review the rest of the contract to ascertain what information the notice should contain

In one case, the tenant’s termination notice stated that the lease would expire on 12 January 1995, when it was only possible for it to terminate on 13 January 1995. The landlord knew that was a mistake and that the tenant had meant 13 January 1995. For that reason, and also because the lease hadn’t required the tenant to use particular words (such as the correct termination date) in the notice, the notice was valid. If it had required the use of specific wording, the tenant would have had to use those exact words.

5 – Serve it by the correct method

For example, if the notice clause states that the notice should be served by way of recorded delivery, don’t serve it by ordinary mail. A Scottish appeal court recently decided that the method of service was unimportant as the notice was received by the correct party, but that was because no prejudice was suffered by the recipient, which won’t always be the case.

At Brodies we have developed BOrganised, a contract management solution to help clients get the most value out of their contracts, while protecting their organisation from the pitfalls of poor contract management.

For more information contact Monica Ross at Brodies LLP.

This post was sponsored by Brodies LLP.