Compliance with notice provisions: pitfalls of an electronic era
Increasingly, businesses use email to conduct their day-to-day affairs, whereas their contracts require notice by fax or post but not email.
How many organisations use fax or even post when communicating with others? Increasingly, businesses use email to conduct their day-to-day affairs, whereas their contracts require notice by fax or post but not email.
In the case of Ticket2Final OU v Wigan Athletic AFC Ltd , the High Court considered the application to a termination clause of one such formal notice provision.
A dispute arose between Ticket2Final (T2F), a ticketing company, and Wigan Athletic AFC (Wigan). Wigan had made contractual representations that it was within its power and authority (among other things) to perform its contractual obligations, including an obligation to supply a certain number of match tickets to T2F. Wigan's failure to meet this obligation was held by the court to be a breach of that representation.
Wigan had also purported to terminate the contract, by reason of late payments by T2F. The contract entitled Wigan to terminate if T2F failed to pay any sums due and the sums remained outstanding for seven days following notice. Importantly, the contract contained a formal notice clause requiring notices to be given in a prescribed manner (not including email).
The relevant clauses were as follows:
7.1 [Wigan] shall be entitled to terminate this Agreement if [T2F] fails to pay any sum due under clause 5.1 on time and such sum remains outstanding for a period of 7 days following notice in writing from [Wigan] that such sum has not been received.
11 Any Notice given under this Agreement shall be in writing and shall be delivered by hand or sent by first class pre-paid post to the party to be served at that party’s registered office or its address appearing in this Agreement … or shall be sent by facsimile transmission to the current facsimile number for the party to whom it is to be sent.
Wigan failed to comply with the requirements of the formal notice clause when it demanded payment before termination. Nonetheless, Wigan argued that the formal notice clause did not apply to a demand for payment before termination and also that there was an implied term arising from the parties' conduct that formal notices could be given by email. Further, Wigan argued that a notice sent by email to a person with whom they were used to communicating would be more likely to come to the attention of T2F than a letter sent to Head Office.
The court disagreed and held that the formal notice clause did apply to the notice demanding payment before termination and that notice by email was not sufficient. He stated that “one of the purposes of clause 11 is to require notices, especially notices which if not complied with might result in the contract being terminated, to be served in a particular manner – for then the recipient can be in no doubt as to their importance”. He also went on to state that he could “see no justification at all for not requiring Wigan to satisfy clause 11 when the consequences would be termination of a valuable agreement if the stipulations in the notice were not satisfied”. The court further rejected Wigan’s argument that an email would more likely be received because it failed “to take into account the purpose of the Notice provisions in the Agreement”.
So what does this mean for you?
This case highlights the importance of ensuring proper compliance with contractually agreed notice provisions and any parties wishing to use email as a means of serving notice under a contract must ensure that notice by email is expressly provided for in the contract. Care must therefore be taken both when drafting notice provisions and when applying them in practice. This case makes clear the need for parties to ensure that the contract reflects the way in which notices will be served in practice and to ensure compliance with the contract. Failure to do so may mean that correct notice has not been given.
If you are interested in finding out more about this case or have any questions about compliance with notice provisions then please contact Catherine Hendy, an Associate in the Corporate and Commercial team, on 0161 214 0580 or email email@example.com.