Without exception, a well drafted contract should contain provisions for how parties can send notices under the agreement. Such clauses will normally stipulate the methods of communication allowed, where notice should be served and rules determining when notice will be deemed to have been served depending on the given circumstances.
The importance of these provisions are often overlooked, possibly due to their procedural nature, but any company that does so may find itself suffering costly implications which could have been easily avoided. The importance of following the agreed notice provision is highlighted in the recent judgment in Ticket2Final OU v Wigan Athletic AFC Ltd [2015] EWHC where the court considered the application of such a provision.
Following a dispute, Wigan Athletic AFC (“Wigan”) purported to terminate its agreement with Ticket2Final (“T2F”) due to late payment. The manner by which the notice should have been served was prescribed in the contract. Despite this, Wigan failed to comply with the provision when demanding payment before termination by sending the demand by email.
Wigan put forward the argument that the formal notice clause did not apply when giving notice for termination and that there was an implied term arising from conduct that email was sufficient. The judge however disagreed by confirming that the purpose of formal notice provisions is to ensure that significant notices are served in the prescribed and agreed manner so that “the recipient can be in no doubt of their importance”.
The judgment highlights the importance of following express provisions in agreements. Wigan, at the cost of the small amount of inconvenience involved in writing a letter, rather than emailing, could have saved themselves the time and cost involved in trying to enforce the notice.
More importantly however, the judgment highlights the wider concept of making a contract reflect how the parties actually want to deal with each other. For example in many situations, such as where parties are in different countries, email would likely be by far the quickest and cheapest means of giving notice under an agreement. A contract can provide for this, including any safeguards necessary to make the concept work, but it requires careful thought at the outset to give detailed consideration as to how the business relationship will operate and then ensuring the agreement is fully tailored to allow this.
If you have a contractual issue you would like to discuss, please do give us a call on 0116 289 7000.
Andrew Spiers, Trainee Solicitor