Often ignored or trivialized, the section entitled “Notices” that appears among the miscellaneous clauses at the end of most contracts (the notices provision) can have significant consequences. Parties to an agreement often overlook this section because it seems boilerplate and innocuous, with little substantive effect. This article will hopefully motivate you to pay close attention to this provision every time it appears in a contract so that you can confirm that the language is comprehensive enough to fairly protect both parties.
Unlike most contract terms, the notices provision is rarely negotiated, and it isn’t intended to benefit one party or the other. The purpose is to reduce possible disputes by clearly defining what constitutes legally-binding notice. The following are common situations where proper notice can be critically important.
Amending or assigning a contract. The miscellaneous provisions at the end of a contract (see Common Boilerplate Provisions in Contracts) typically include sections on how the parties can either amend the agreement or assign the agreement to third parties. These provisions regularly require the written consent of one or both of the parties. The notices provision will govern how these written consents can be properly conveyed. Clearly, it is in the best interests of both parties to avoid any confusion when it comes to either amending or assigning the contract, both of which are significant matters.
Contract defaults. Provisions addressing breach and default strongly rely on notice. A common method of handling a default is to provide a cure period. In these cases, the non-breaching party delivers a detailed, written notice to the breaching party of its default. If the breaching party does not cure the default within the time frame set forth in the agreement, then the non-breaching party has the right to terminate the agreement. This is yet another situation where the notices provisions for each party must be unambiguous.
Accepting or rejecting an offer. Sometimes contracts state that if one party (the offering party) sends a notice describing a particular proposal (an offer notice) to the other party (the receiving party), then that proposal is deemed automatically accepted unless the receiving party delivers a rejection (or counteroffer) notice to the offering party within a certain time frame. In these instances, the offering party wants to be certain that it has validly delivered the offering notice, just in case the receiving party fails to respond. In such cases, the offering party wants to prevent the receiving party from making the argument that the offer notice was either improper or nonexistent, which would invalidate the proposal. On the other hand, a receiving party who acknowledges the receipt of a legitimate offer notice wants to be sure that its rejection of the proposal is properly delivered to the offering party.
Term renewals. When it comes to the term (duration) of an agreement, parties often include conditions for renewing the agreement for additional or successive terms. Sometimes these provisions are structured so that the term automatically renews unless one party properly delivers a termination notice to the other party before a specified date (which date is usually a stated number of days prior to the end of the then-current term). Conversely, these clauses can provide that the agreement automatically terminates unless one of the parties properly delivers an extension notice to the other party prior to a specified date.
Terminating the contract. A contract can permit the parties to terminate the agreement in a variety of ways. But whatever the specifics, many termination provisions require that one of the parties (or either party) can terminate the agreement by notifying the other party in writing. Some agreements allow a party to deliver a termination notice at any time, while others place timing or other restrictions on the notice.
An effective notices provision should require that all notices be made in writing and contemplate all acceptable methods of delivery. Here is an example of a comprehensive notices provision:
Notices. Any notices or communications required or permitted to be given by this Agreement must be (i) given in writing and (ii) personally delivered or mailed, by prepaid, certified mail or overnight courier, or transmitted by facsimile or electronic mail transmission (including PDF), to the party to whom such notice or communication is directed, to the mailing address or regularly-monitored electronic mail address of such party as follows:
To [Party 1]: [Company Name]
Telephone: (___) ___-____
Fax: (___) ___-____
To [Party 2]: [Company Name]
Telephone: (___) ___-____
Fax: (___) ___-____
Any such notice or communication shall be deemed to have been given on (i) the day such notice or communication is personally delivered, (ii) three (3) days after such notice or communication is mailed by prepaid certified or registered mail, (iii) one (1) working day after such notice or communication is sent by overnight courier, or (iv) the day such notice or communication is faxed or sent electronically, provided that the sender has received a confirmation of such fax or electronic transmission. A party may, for purposes of this Agreement, change his, her or its address, fax number, email address or the person to whom a notice or other communication is marked to the attention of, by giving notice of such change to the other party pursuant to this Section [_].
Although rarely used in practice due to the advent of electronic communications, your notices provision should always include a method for the parties to communicate via the postal services, provided that it is a reliable service that can generally be tracked and certified.
Although much less rarely used than email, many business communications are still conducted by fax, whether it be through the traditional fax machine or an online electronic mail fax service.
Because most modern day written business communications are made via email, the notices provision should include an electronic transmissions clause that contemplates emails, PDFs, and any other newly-emerged methods of electronic transmission. The email address provided by each party should be current and checked regularly.
The remainder of the notices provision is intended to give the parties as much specificity as possible with respect to each mode of written notice so that both the sender and the recipient fully understand when notice has been legally sent and properly delivered under the contract.