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It's Nice to be Noticed (Sometimes): Boilerplate Notice Provisions

M&A Agreements Boilerplate Series

Publication
October 6, 2019
In life, sometimes it is nice to be noticed. In the legal world, however, whether or not a party is properly noticed can have serious ramifications, especially if the party is not particularly interested in being noticed. Yet many practitioners relegate the notice provision of an agreement to the dustbin of boilerplate, barely glancing at what it says except to insert names and addresses.

A recent case illustrates the importance of these provisions. In Megacenter vs. Goodman, the notice provision provided several ways to effect notice, and required a copy of the notice be sent to counsel. Megacenter sought to terminate a purchase agreement and receive a return of a $750,000 deposit by sending a termination notice solely to counsel for Goodman. However, notice solely to counsel did not comply strictly with the notice provisions of the agreement. The trial court ruled in favor of Goodman that notice was faulty. The Florida Third District Court of Appeal, however, was more solicitous and ruled that Megacenter had "substantially complied" with the notice provisions of the contract. If the notice provision had been more carefully drafted and if Megacenter had followed the procedure punctiliously, this issue never would have had to wind its ways through trial and subsequent appeal, with all the attendant costs and hurt feelings.

Most notice provisions were first written around the turn of the 20th century, when antiquated technologies such as telexes were still in vogue. (You would be amazed at how many agreements still provide for notice by telex.) But even more modern technologies such as faxes are fraught with danger. How many companies still even have fax machines any more? And if they do, how many actually have paper in them and how often does anyone check them?

Even the supposedly reliable U.S. Post Office cannot be trusted to deliver notices timely or at all; witness the existence of the "dead letter" department at your local post office. I once sent a postcard to my two children from a hotel in New York by U.S. mail on the same day to the same home address, and the postcards arrived two days apart! In many agreements, a delay of a single day could mean the difference between curing a payment default and accelerating a multi-million dollar loan.

In the case of overseas notifications, it gets even trickier. I also sent postcards to my kids from various faraway places I visited on business or pleasure, and the variance in delivery times was astounding. The worst was Venezuela, from which my sweet mailings took more than two months to arrive (also on different days). So the post office, be it U.S. or foreign, is not a reliable means to provide a legal notification.

In today's business world, nearly all communication is carried on by email. Yet most practitioners are reluctant to use email as a means of providing legal notices. There are some practical and technological reasons for this reluctance, although most can be overcome. First, we are all inundated with reams of emails every day, and it would be easy to miss an important one. Second, the email could be blocked by increasingly vigilant anti-spam and virus filters. Third, and perhaps most importantly, emails are personal to the addressee and if the person leaves the client or the firm, to whom would the email be delivered?

One answer to this is not to rely solely on email but rather require a second means of delivery to confirm the email notification. The best second means of delivery, and again the one most used these days in business, is an independent overnight courier such as FedEx, DHL and the like. So a notice of default could be sent by email on a timely basis and thereafter followed by a courier delivery the next day.

The notice provision also should address the question of the date of delivery. Routinely, agreements provide that notice is deemed given when sent, but if your client is the likely recipient of a breach notice or other important notice, the mere sending of the notice (particularly if it is going to take a month to arrive) is hardly adequate. Better practice is to identify how many days (which should be stated as "business days" the definition of which I leave to another day and another article) after being properly sent the notice is "deemed" received.

The appropriate number of days depends on the means of transmission. If you insist on using the U.S. mail notwithstanding my caution above, I recommend no less than five business days after depositing (with proper postage due) at the post office. One often sees three business days but my experience is that the U.S. Post Office's delivery schedule is too erratic for such a short time period. If sent by overnight courier, then the next business day should suffice. And although email is designed to provide instantaneous notice, this too should be limited to the next business day.

I also leave for another day (and another article, if you can stand it) whether default and other provisions of an agreement requiring a notice on a certain day or after the expiration of a certain time period should always require that the day fall or the time period expire on a business day. Although the business world now seems to run 24/7, nonetheless agreements should provide that if the calculation of any time period requiring notice expires on a non-business day, the time period should be extended to the next business day.

Another issue that practitioners routinely ignore is whether they (the lawyer) should be copied on the legal notification. Personally, I think it is a bad idea because including yourself then places a burden on your or your firm to hunt down the client (who may no longer be a client or even exist) and make sure they have been notified. You could also find yourself in court testifying as to your efforts to track down a shy client that has evaded all attempts to be noticed. So why make it easy on the other side to notify your client? If you must for ego (we all like to see our name in lights) or other reasons list yourself in the notice provision, always include the following language: "(but which shall not constitute notice to [client])," which, incidentally, would have avoided the issue in Megacenter.

Regardless of what is said in the formal notice provision, I recommend notifying the other side by all available means and methods, including the aforementioned telexes, faxes, snail mail, email, courier and even WhatsApp if you have the contact information. Although not all courts will be as solicitous of extra-contractual notifications as was the court in Megacenter, it can't hurt. Keep in mind that the cost of all these notification means is relatively low while the consequences of not properly notifying another party can be huge. So spring for that extra stamp and cross your fingers that the other side is not hiding somewhere where "neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed round.”

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Jose Sariego

Jose Sariego

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