How to draft a good notice clause
A good notice clause can protect the parties from serious future disputes.
Contracts often require a contracting party to bring certain facts “to the notice” of the other contracting party. When I bring something to your notice, or “serve notice” on you in legal parlance— essentially, it means I am informing you of something.
Almost every modern contract contains a notice clause. A notice clause is one of the easiest contractual clauses to draft. However, a well-drafted notice clause is a nuclear weapon which can save the contracting parties from a plethora of silly disputes.
The ubiquity of notice clauses
Notice clauses are indispensable to the typical modern contract. This is because — modern contracts, by their very nature, require a contracting party to bring certain informations to the notice of another contracting party.
Consider these examples, for instance:
- Confidentiality Agreement — How do I know you have failed to protect the confidential information I have shared with you? You serve notice upon me, informing me that some confidential information has been unlawfully disclosed.
- Lease — How do I know you want to terminate the lease on my house? You serve notice upon me, stating your intention to do so.
- Road Carriage Agreement — How do I know you want me to pick up the goods you want me to transport? You serve notice upon me, directing me to pick up the goods.
- Terminable Contracts — How do I know you have terminated a contract? You serve notice upon me, informing me that you have done so.
- Arbitrable Contracts — How do I know you have commenced arbitration proceedings for my alleged violation of a contract? You serve notice upon me, informing me that you have commenced arbitration.
The examples are innumerable. I can think of at least one situation in almost every modern contract wherein notice is essential.
The dilemma of serving notice
Serving notice is ubiquitous, but it’s easier said than done.
There’s always the question lingering in the background— how should I serve notice? Some considerations which may play in a contract drafter’s mind are:
- Should the notice go through email or Speed Post? How reliable is the method I have chosen?
- Where must I serve notice — to which physical address, email address, or even a WhatsApp number?
- How should the notice be drafted— should it be on my letterhead, does it require to be signed, etc?
- What happens if the notice is misdelivered, or the recipient refuses to be served?
These questions (and many more), if left unanswered, can — and do — give rise to major disputes between the contracting parties. The parties will be fighting over whether notice has indeed been served — on seemingly “flimsy” (to the aggrieved party, of course) and extremely “technical” grounds sometimes; such as misdelivery, loss in post, late receipt, etc.
It’s indeed a shame, because:
- These disputes arise over tiny technicalities— non-delivery, misdelivery, late receipt, improper mode of service, denying that notice was ever served, etc.
- Since the tripping-stones are small, it’s really easy to avoid these disputes through good contract drafting — by incorporating a comprehensive notice clause into the contract. A good notice clause is a teeny-weeny bit of a thing which can easily save the contracting parties from a lot of trouble in future.
The solution — enter, the notice clause
First, let’s identify the problem. Sans a notice clause, the contracting parties may have different expectations regarding how notice must be served. This divergence of expectations is what create disputes.
The solution, then, is pretty simple— establish clear expectations for the contracting parties. A notice clause serves exactly this purpose.
Drafting a good notice clause
(i) Essentials.
A good notice clause clarifies every issue on which the contracting parties may possibly disagree on (in the arena of notice, of course).
Hence, every essential element of a good notice corresponds to an issue regarding notice the parties may disagree on.
Applying this principle, the essential elements of a good notice clause should be:
- Author: In many cases, a contracting party is a corporation — obviously, a corporation cannot issue notice by itself (it is an inanimate entity), a human being must issue notices on its behalf. In other cases, a contracting party may want to authorise another person to issue notices on her behalf. Hence, a notice clause must specify who is authorised to issue notices — an additional safeguard would be to require the signature of that person on every notice so issued.
- Contents of the notice: The notice clause should clearly specify the elements the notice must always contain. For instance, a notice clause may require the contracting parties to, date every notice and write every notice on the letterhead of the party serving notice.
- Mode of service: Notice can be served through many modes— personal hand delivery, ordinary post, Speed Post, email, etc. The notice clause must exhaustively specify the mode[s] by which notice may be served. For instance, a notice clause may specify that notice may be served only through Speed Post or email.
- Recipient: Which person must the notice be addressed to, and where must it be delivered? A notice clause must clearly specify both. For instance, a notice clause may require all notices to a corporation to be, addressed to its Director (Contracts) and delivered to its registered postal address.
- When service occurs: This is by far the most contentious issue a good notice clause must settle. What happens if the notice is lost in post, or is delivered late, or the specified email address of the recipient returns an error message? Lots of things can go wrong during the service of notice, and the effects of these must be settled conspicuously. For instance, a notice clause may provide that notice is deemed to have been served, when the email has left the author’s computer system and the author’s email service has not returned any error in respect of this email.
(ii) Examples.
What might a notice clause which incorporates all these essentials look like? Here are some examples.
This notice clause, drafted for a contract between two companies, requires service of notice only through email:
18. Notice.
18.1. Whenever this contract requires or allows Notice, the Notice must:
(a) be written;
(b) state with reasonable certainty the information being communicated;
(c) be electronically signed by, a person authorised to issue Notice on behalf of the Party issuing Notice;
(d) be dispatched by email;
(e) be dispatched, from the designated email address of the Party issuing Notice, to the designated email address of the other Party.
18.2. Every Notice will be deemed to have been served when, the email through which it is dispatched leaves the computer system of the person issuing Notice.
18.3. The designated email addresses of the Parties are:
Licensor: vp.contracts@zuluinfotech.in
Licensee: rel.manager@xaetech.in
Here’s another example — this notice clause, drafted for a contract between two companies, requires service of notice through email or Speed Post:
18. Notice.
18.1. Whenever this contract requires or allows Notice, the Notice must:
(a) be written;
(b) state with reasonable certainty the information being communicated;
(c) be physically, or electronically, signed by a person authorised to issue Notice on behalf of the Party issuing Notice;
(d) be dispatched by, email or Speed Post;
(e) be dispatched:
(i) from the designated email address of the Party issuing Notice to the designated email address of other Party— if sent by email,
(ii) from the designated mailing address of the Party issuing Notice to the designated mailing address of the other Party— if send by Speed Post;
18.2. Every Notice will be deemed to have been served when:
(a) the email through which it is dispatched leaves the computer system of the person issuing Notice— if sent by email;
(b) the Speed Post item through which it is dispatched is confirmed to have been delivered— if sent by Speed Post.
18.3. The designated email addresses of the Parties are:
Licensor: VP (Contracts), Zulu Infotech Pvt. Ltd., 26, Rosedale Avenue, Kolkata — 700 068, West Bengal, India.
Licensee: Relationship Manager, XAE Tech Systems LLP, Chamber No. 26, L&T Towers, J.L. Nehru Road, New Delhi— 110 007, India.
Many more variations of notice clauses are possible— it all depends on what you want to put in the clause.
Epilogue
The essential elements of a good notice clause remain the same, regardless of the content you ultimately choose to put in a notice clause.
No doubt, the content of a notice clause will depend on the intention of the contracting parties and the professional advice of their advisors. Whatever the content may be, the content of a good notice clause should satisfy all these essentials.
