In House Lawyers Update: Using email for contractual notices

Providing for notice by 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. The case below shows the importance of checking and complying with the notice provisions in a contract. Although emails are becoming common as a means of communication, contracts rarely allow for critical notices to be served by this means.

Ticket2Final OU v Wigan Athletic AFC Ltd (2015)

A contract between Wigan and T2F allowed Wigan to terminate the contract in the event that T2F failed to pay any money owed to Wigan, if such money remained outstanding for seven days following notice to T2F of the same. The contract also contained a notice clause formalising the manner in which notices should be served.

Wigan sought to exercise its termination right having served notice on T2F demanding payment for the outstanding sums without any subsequent resolution or payment. Wigan served notice demanding payment from T2F by email and thereby failed to comply with the contractual notice requirements.

Wigan argued that the notice provision did not apply to notices demanding payment. In addition, according to Wigan, there was an implied term, arising as a result of the parties’ conduct to date, that notices could be delivered by email.

The judge disagreed with Wigan. The contractually agreed notice provisions would apply to notices demanding payment. The judge explained that notice provisions existed to ensure that important notices are served in the agreed manner therefore guaranteeing that the recipient would not be in any doubt as to their importance. A notice which, if not complied with, might lead to termination would certainly be considered an important notice meaning that the agreed notice provisions must be observed.

Comment

As this case demonstrates, once you get into the habit of using email, you tend to use it for all communication including contractual notices, which can be fatal if this is outside what is prescribed in the contract.

In this context, a 2014 case in the Queensland Supreme Court is of interest, as it addressed a similar issue of whether the “cloud based” storage service “Dropbox” is an effective tool for service.

The court questioned whether any form of service by Dropbox would be valid, given that electronic service was not contemplated in the contract.

Increasingly we are being asked to include email as a valid method of serving a notice in contracts and other legal documents. However, there are risks involved. These include:

• Interception by a third party.
• The email arriving late or not at all, for example through server failure, data overload, interception by spam filters, or an incorrectly typed address. Failure notices are not always sent, or may be delayed.
• The email arriving but being unintelligible, or containing changed formatting, which may have altered the meaning.
• Suspicions that it may be comparatively easy to forge or falsify an email, compared to hard copy documents.
• Fears that, in some jurisdictions, emails may be less trusted than more formal documents.

One of the key concerns is as regards when delivery occurs – should this be when it leaves the sender’s server or when it is received by the recipient’s server? Or when it is actually received by the recipient? What if the recipient is on holiday and the email prompts an out of office notification? Some of these issues can be dealt with by a deemed delivery clause, but this may not be satisfactory from the recipient’s point of view.

Our view is that giving notice by email should always be accompanied by a requirement that a hard copy be sent by first class post or special delivery to the intended recipient at their office address so that you can be sure that it will come to the attention of either the person concerned or the person covering any absence. We therefore recommend a clause similar to the standard clause used when allowing service by facsimile (requiring post as well).

In addition it really is worth checking contracts and considering if service by facsimile is still relevant- how many companies still have a fax machine? If you include this then post as well should definitely be the requirement.

Practice points

If you decide to allow notification by email in your contract:

• Be clear about the form of electronic communication that can be used, eg you might wish to exclude notification via Dropbox. Note that in the 2014 case of Greenclose Ltd v National Westminster Bank plc, the court held that delivery via an “electronic messaging system” did not include email.
• Is email an appropriate means of service for all types of notice to be given under the agreement or should it be restricted to non essential notice, with more important notices, for example termination, still being required to be in writing.
• Add a requirement for the document to be sent by first class post the same day (or by other specified means) so you can be sure it gets attention.
• Think carefully about which email address to use. If a specific person is to be notified, will that person still be with the organisation when the notice is sent? Consider setting up “legalnotices@” type inboxes with a set distribution list (eg General Counsel, other relevant directors).
• If necessary, would you be able to prove that the email had been sent?
• When is legal delivery to occur for the purposes of the contract? Is proof of delivery required?
• Because of the difficulties in proving delivery, include a deemed delivery provision, although you might want to resist this if you are the likely recipient.

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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.