Serving contractual notices: wrong method, right result | White & Case LLP International Law Firm, Global Law Practice
Serving contractual notices: wrong method, right result

Serving contractual notices: wrong method, right result

Contracts usually stipulate for specific requirements that need to be carefully followed in serving contractual notices, failing which serious issues may arise. Two recent cases highlight the courts' approach to notice provisions where a notice has been served, albeit not by the contractual means for doing so.

 

Wrong method, right result

In Torbey Investments Corporated Pty Ltd v Ferrara [2017] NSWCA 9, the construction contract in question required notices to be "given by certified mail or personally". The employers served a default notice and later a termination notice by letters that were sent by neither method, yet clearly were received by the contractor. The contractor claimed the notices were invalid (and that consequently so was the purported termination) because they did not comply with the notice provisions in the contract.

The court ruled that when (as here) receipt and comprehension of a notice is duly acknowledged, it would be unreasonable to argue that the notice is invalid because it was not sent according to the method specified in the contract. In this case, the contractor's responses to the employers' notice of default and its subsequent notice of termination indicated an understanding that termination of the contract was being sought by the employers.

The court observed that in the absence of explicit wording in the contract or similar evidence of the parties' intention, it would be unreasonable to construe a provision for service by certified mail "as excluding the giving of notice by equally other expeditious means which do in fact result in the actual receipt of the notice by the" other party.

Therefore, unless a particular form of notice or method of delivery are explicitly excluded in the contract or otherwise not permitted by law, it is possible to serve a valid notice by a contractually unspecified means as long as it fulfils its purpose and it is clear to the receiving party that it is given as a contractual notice.

The court further observed the importance of "adopting a flexible construction of the language" in the contract in order to give effect to the commercial purpose of the notice provisions:

"Thus, in circumstances where it was established that the relevant information had in fact been received, and a purpose of the mandatory language had been achieved, any formal non-compliance should not be seen as rendering the notice ineffective under the contract."

 

Course of conduct

As a further matter, if parties choose to engage in a particular course of conduct when serving notices, the parties may be prevented from later contending that this particular method of serving the notice was legally ineffective, even if the method is not explicitly included in the contract. In Jawaby Property Investment Ltd v The Interiors Group [2016] EWHC 557 (TCC), the court concluded that a contractor’s interim payment application had been validly served by email even though the contract expressly required such applications to be served by hand, fax or post. In reaching this conclusion, the court held that the employer:

"is estopped from asserting that notification by email is invalid by reason of the parties' course of conduct, which extended over months and on a significant number of valuations"

As in Torbey Investments, the court held that "clear and express" words would be needed in the contract to make impermissible service by alternative yet practically effective means – such as email.

 

Conclusion

These two cases illustrate that valid service of a notice can still be achieved despite the use of a method or form not contractually specified. What is necessary, however, is that any alternative service takes place by a method that is (a) effective in terms of actual communication of a contractual matter; and (b) evidently acceptable to the party to whom the notice is sent.

Notice provisions in construction contracts and other commercial agreements exist for a purpose. That purpose is to give the parties certainty over how they may communicate with each other, and when a communication will be effective for contractual purposes. Departing from an agreed method of communication comes with significant risks, but fortunately the courts take a pragmatic approach to considering the validity of notices served by alternative means.

 

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