Notices Provisions: Not Just Irrelevant Boilerplate
Have you experienced a delay in receiving your mail or an increase in "lost" mail due to the Covid crisis? I have and it is frustrating. Imagine how frustrated you would be if you are bound by an poorly drafted notice provision under which your cure period expired prior to ever receiving notice of your client's breach. Too many practitioners agree to language providing notice is deemed to be received x days after mailing. While imprudent under normal circumstances, the delays in the mail caused by COVID make agreeing to such language extremely risky at best. At a minimum, notice should be effective upon receipt, and the sending party should be obligated to send copies to at least two other individuals, one of which should be outside of the receiving party (i.e., their lawyer). Further, if notice is sent electronically, a written confirmation copy should also be sent. This will hopefully ensure the notice will be received.
Despite the strongest precautions, disputes will arise. At least one court has found that when parties identify the mode of notification, they are indicating an intention to consider the communication “received” when the notice is dispatched in accordance with such requirement. United States v. Continental Casualty Co., 245 F. Supp. 871, 873 (E.D. La. 1965). Similarly, a Maryland court has found that notice was effective upon its mailing. Grubbs v. Prince George’s County, 297 A.2d 754 (Md. 1972). As such, the parties should include language that notice is effective only upon receipt.
Notice provisions are not usually highly negotiated but, as electronic communication becomes more prevalent and accepted, the parties should also carefully consider to whom notices should be delivered, and how “notice” should be delivered.
In general, notices should not be addressed to an identified individual but rather directed to a specific position such as “Chief Executive Officer” or “General Counsel.” Doing so will potentially eliminate problems that may arise when the identified individual leaves the company, creating uncertainty as to who the notice should be sent to or even preventing it from being delivered. To that end, each party should be obligated to notify the other party in the event of a change of address or a change in the recipient of the notice. Further, the notice provision should provide when notice is effective. For example, all notices should be sent in a manner that requires a signature to confirm receipt. Notices should be effective on the date of signature or the date receipt is refused. Most notice provisions provide for delivery by registered mail or overnight courier. An increasing number provide for notice through facsimile and e-mail.
Facsimile notices should be discouraged as there are significant risks. The notice may be received, picked up by an employee other than the recipient, and not delivered to the recipient. Further, the notice may be retained in the machine’s memory due to a lack of paper or other problem and never printed out or inadvertently deleted. In each of these instances, the notice could be contractually satisfied and the cure period started without the intended recipient ever realizing it. Finally, privacy issues create additional concerns as a breach notice may be read by any employee passing by the fax, creating a confidentiality issue.
E-mails are equally problematic. The receiving party’s spam filter may block the e-mail after its receipt without ever notifying the receiving or sending party. If the e-mail’s heading does not clearly reflect its content, the e-mail may be deleted by the receiving party. Further, the receiving party may leave the company or be assigned a new e-mail address preventing receipt of the message.