Notice Provisions – Be Clear, Be Compliant

Notice provisions are clauses that set out how the parties to a contract will communicate with each other about important legal or operational matters related to their agreement.

Often these provisions are overlooked as ‘boilerplate’ terms and given little attention in contract reviews. With courts taking an increasingly hard line against those who don’t comply with notice formalities, this is a mistake few can afford to make.

2015 has seen a number of notice-related cases heard by UK courts. They emphasise the importance of clarity when drafting notice provisions, as well as complying with them exactly, once contracted.

Scottish Power UK PLC v BP Exploration Operating Co Ltd
[2015]

In this case, BP Exploration had contracted with Scottish Power UK to supply natural gas. Due to issues with the gas extraction site, BP Exploration was unable to fulfil its contractual obligation to Scottish Power to deliver the natural gas. BP sought relief from the contract for force majeure (unforeseeable circumstances that prevent the performance of a contract).

The contract contained a notice provision setting out the obligations of a party seeking relief for force majeure (Article 15.4), which stipulated that they shall:

  1. “Within ten (10) Days of the failure … for which relief is sought, notify the other party thereof and shall within five (5) Working Days of such notification provide an interim report which shall furnish such relevant information as is available…
  2. within twenty (20) Working Days of such notification, if requested, provide a detailed report which shall amplify the information contained in the interim report…”

Following the claim for relief, BP maintained that it had complied with Article 15.4(1), having notified Scottish Power by letter of its intention to claim relief for force majeure as well as filing an interim report. BP did, however, submit that it had failed to provide a detailed report as required by Article 15.4(2). In response to this, Scottish Power claimed that compliance with Article 15.4(2) was a condition that was required for a successful claim for relief.

The court held that the notice provision could not be construed as a ‘condition’ unless it was expressly framed as such. So if Scottish Power had wanted to prevent BP benefitting from the force majeure provisions if it failed to comply with Article 15.4, the contract would have had to state this clearly – as it was, the failure to comply with Article 15.4(2) was a contractual breach that may give rise to damages, but not a mechanism preventing BP from exercising relief under force majeure.

What this means for those drafting notice provisions is that if you wish to make one party’s rights conditional upon them complying with the notice provisions, you must say so explicitly.

IPSOS SA v Dentsu Aegis Network Limited [2015]

This case created a clear and obvious conditional relationship between the giving of notice in accordance with the notice provisions in the contract, and a party’s ability to exercise a warranty claim.

IPSOS purchased a number of shares from Aegis. A number of employment related claims were made by IPSOS pursuant to Brazilian Labour Law.

The share sale and purchase agreement between the parties stated in Article 3.1 that

“No Seller Warranty Claim, … Indemnity Claim … shall be brought against the Seller unless (and the Seller shall only have liability in respect of any such Claim if) the Purchaser shall have given to the Seller written notice of such claim …”

The claims made by IPSOS were communicated via a series of letters, none of which expressly said anything along the lines of “This is a claim against Aegis by IPSOS under the provisions of Article 3.1”. While the letters alluded to issues and claims made against the company IPSOS had bought shares in, they were not set out as claims against Aegis.

Consequently, the court held that the letters sent did not constitute unequivocal notice to Aegis of any claim as per Article 3.1 of their share sale and purchase agreement. As the time limit allowed for claims had expired, the court concluded that IPSOS was now unable to bring a successful claim.

Rubbing salt in the wound, the court suggested that had the claim been brought pursuant to Article 3.1, it would more than likely have been successful. So IPSOS missed a chance to benefit from the warranty remedy in the contract because it didn’t follow the contractual notice process correctly.

Ticket2Final v Wigan Athletic

This final case illustrates the vital importance of complying with notice provisions when attempting to terminate a contract. Here, Wigan made it to the FA Cup Final of the 2012-13 football season, which they went on to win. Wigan had contracted with Tickets2Final to provide them with a number of tickets to the FA Cup Final, but then failed to deliver.

Wigan argued that they were not liable for breach for their failure to deliver the tickets as T2F had previously failed to make a number of payments as a result of which Wigan had sent a notice of termination to T2F via email. So at the point at which Wigan would have been in breach, they alleged that the contract had already been terminated.

The court noted that under Clause 11 of the agreement between Wigan and T2F, notice of termination was to be given in writing and delivered by hand or first class post to the registered office. It held that by sending an email with notice of termination, Wigan had not met these requirements and therefore the contract had not been terminated – so Wigan was actually in breach by failing to deliver the tickets.

In a summary judgement, the court noted that the purpose of such notice provisions was to make the receiving party absolutely aware of the importance of the document they are receiving.

Conclusion

These three cases, whilst discussing entirely different scenarios, provide an important reminder that notice provisions are not simply legal ‘boilerplate’ and need to be taken seriously. Make sure they’re clear, appropriate and relevant to the deal you’re making, and then follow them!

If you’d like help creating or reviewing your notice provisions please get in touch, we’d be pleased to assist you.

 

callum sommerton devant

 

 

 

Callum Sommerton
The Butler, Devant

2017-02-19T13:49:49+00:00

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