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Case law: Contracts requiring service of a series of notices should specify if intervals are required between them

Parties negotiating a contract should consider whether imposing a requirement to serve a series of notices in certain circumstances makes commercial sense and is required at all; or if one is to be included, whether the contract should expressly specify a minimum period between service of each notice - because such a period will not be implied.

June 2019

This update was published in Legal Alert - June 2019

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A business commissioned a contractor to design and build a new hotel, but there was a delay in completing the project.

Under the contract, the business could deduct pre-agreed compensation from its payments to the contractor if there was a delay. However, it first had to follow a notice procedure requiring it to serve three notices on the contractor in sequence, namely, a ‘Non-Completion Notice’, a ‘Warning Notice’ and a ‘Deduction Notice’.

The business served the Non-Completion Notice on 13 October 2016. It then served both the Warning Notice and the Deduction Notice on 18 April 2017 by two emails which arrived within eight seconds of each other.

The contractor claimed that serving the notices that close together invalidated them, as it did not give enough time after the first Notice to make proposals to remedy the situation and avoid having to pay compensation.

The Court of Appeal’s view was that the whole notice procedure in the contract ‘provides no obvious benefit to anyone, if the employer warns the contractor of what he may do just seven or eight seconds before he actually does it’. However, it reluctantly ruled that the notices were validly served, saying that it was ‘impossible to identify any specific period of time which should elapse between serving notice 2 and serving notice 3. To say that there must be a 'reasonable' lapse of time is unworkable ... Also, it would create huge uncertainty in future cases’.

It therefore ruled that if it had been the parties’ intention that a specific period of time should elapse between notices, the contract should have said so.

The court also found that a term requiring a period between service of each notice could not be implied because the strict test for implying a term had not been met. A term can only be implied into a contract if it is:

  • necessary to give business efficacy to the contract (so, if the contract works without that term in it, the term will not be implied); or
  • so obvious that it goes without saying.

The test also requires that the term a party is seeking to have implied into the contract must be capable of clear expression and must not contradict any express term of the contract.

Operative date

  • Now

Recommendation

  • Parties negotiating a contract should consider whether including a requirement to serve sequential notices in particular circumstances makes commercial sense, or is even required at all; or if it is included, whether to expressly specify a required period before the next notice can be given, as such a period will not be implied.

Case ref: Grove Developments Limited v S&T (UK) Limited [2018] EWCA Civ 2448

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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