Commercial Contracts: giving effective notice

/images/uploads/blog/Buyer_Beware.jpg
Commercial contracts often include obligations on the parties to provide notice of an intention to carry out a certain action, such as notice to terminate. At top Bahamas law firm ParrisWhittaker, our experienced commercial lawyers provide clients with expert, strategic advice on their commercial contracts.

Commercial contracts often include obligations on the parties to provide notice of an intention to carry out a certain action, such as notice to terminate.  At top Bahamas law firm ParrisWhittaker, our experienced commercial lawyers provide clients with expert, strategic advice on their commercial contracts.

In a recent case in the UK, the court ruled that the party’s failure to follow specific contractual provisions in a commercial agreement when giving notice made the notice invalid.

What’s the background?

Hoe International, a distributor of distilled spirits, purchased the entire share capital of a distiller company, the terms of which were set out in a share purchase agreement.

The agreement required the seller shareholders to disclose any disputes the company was involved in. The sellers duly disclosed an earlier dispute with a third party, and they gave a warranty in the agreement that should that third party resurrect its claim, the buyer had to give notice to the seller as soon as reasonably practicable.  The terms stipulated the requirements for a valid notice.  In particular it specifies that service must be sent by first class post, recorded delivery or personal service.

Unfortunately, the third party resurrected the claim and the buyer’s solicitor gave notice to the sellers both by email and using the DX document exchange service – neither of which were actually authorised under the contract terms.

At issue was whether the buyer could enforce the warranty in circumstance where notice had not been properly given under contract terms.

What did the court decide?

The court found that the notice had not been validly served under the contract terms.  It concluded on the facts that the parties did not intend to allow deviation from the notice provisions which specified exactly what constituted a valid notice.  The court said: “The exclusion of email demonstrates that the parties regarded the mode of service as important.” The buyer could not, therefore, claim under the warranty.

What does this mean?

Contractual parties are strongly advised to pay close attention to their obligations under the terms of a commercial contract, including notice provisions.  If they don’t, they may find their notices (and other actions or non-actions) are invalid.

How can we help?

For expert, incisive legal advice on your commercial contracts, call the experienced commercial lawyers at ParrisWhittaker.  If you are considering taking action – such as giving notice – in accordance with the terms of your contract, contact us for expert legal advice to ensure your interests are properly protected.

_{1Hoe International Ltd v Anderson & Aykroyd [2016] CSOH 33}