How are you being served?
The devil really is in the detail when it comes to administrative clauses in a contract. Jane Hughes explains all
Recent case law shows that the clauses in a contract which deal with administrative matters are all important, especially at a time when many projects, entered into during more thriving economic times, have become unprofitable.
To avoid further loss, parties may exploit administrative errors as an opportunity to get out of the contract.
Here, we examine what weight should be given to contractual provisions for the service of notices, and how, when, and by whom they should be served.
In Yates Building Company Ltd v R J Pulleyn & Sons (York) Ltd [1976] 1 EGLR 157 the Court of Appeal adopted a relaxed interpretation of service provisions. The dispute revolved around an option granted to the claimant to purchase building plots owned by the defendant.
The option was to be exercised “by notice in writing” to be sent “by registered or recorded delivery post”.
The notice was sent by ordinary post and subsequently acknowledged by the defendant. The defendant then refused to complete the sale on the ground that that notice had not been properly given.
In his judgment, Lord Denning favoured what he considered a commonsense view. The notice had actually been received, regardless of the fact that the specific contractual provisions relating to service had not been followed.
Harder line
The 1981 case from the Singapore Court of Appeal Central Provident Fund Board v Ho Bock Kee (t/a Ho Bock Kee General Contractor) 17 BLR 21 represents a harder line. Although not binding in the UK, it is a useful case.
The contractual provisions specified that any notice of determination was to be sent by registered post. A notice of determination was delivered by hand. While the legal issues in this case were similar to those in Yates, the result was effectively the opposite.
The judge concluded that registered post was the only method of service provided for in the clause and that any service would be invalid unless this specific requirement was met.
The contract further specified that the power to determine was reserved to the chairman. The notice of determination was served by the superintending officer. The Singapore Court found that the notice was invalid because it had been served by the wrong person.
This case will be of particular interest where professional consultants serve notices on a client’s behalf, for example in the context of a construction contract. Unless served by the entity specified in the contract, such notices may be invalid.
Recorded delivery
Any clauses dealing with the service of notices must therefore be considered very carefully. In Construction Partnership UK Limited v Leek Developments Limited [2006] CILL 2357 QBD (TCC) the clause dealing with notice requirements specified that any notice shall be “given by actual delivery or by special delivery or by recorded delivery”.
The contractor’s notice of determination was served by fax and by post. The question for the court was whether service by fax constituted actual delivery.
The judge determined that ‘delivery’ is the transmission of the document by an appropriate means so that it is actually delivered.
Whether or not the fax is read is a matter for the recipient and not for the party serving the notice. It does not require a physical handing over. In this case, service by fax did constitute actual delivery.
Time limit
The general principles governing clauses dealing with the service of notices under a contract will be largely the same regardless of to whom, when or how the notice is to be served. The crucial element in each case is the drafting of the relevant clause.
The decision of Lord Denning in Yates may appear to be an eminently sensible conclusion as the chief intentions of the parties had been satisfied. However, it left room for uncertainty.
The stricter interpretation ensures that there is no uncertainty as to what constitutes service. Specific requirements for service can be strictly construed as they are there to help both parties understand their respective obligations.
This transparent approach is mirrored in relation to the time of service. It is a question of whether the relevant clause has language that clearly intends the contracted party to adhere to the deadline.
It is crucial that any clauses containing requirements dealing with the service of notice are clearly drafted and that the steps required can be easily followed. This will enable the parties to avoid a breach, or to establish clearly and quickly if there has been one.
If a notice needs to be served during the course of a project, it is absolutely paramount that all the formalities are adhered to very closely.
These small steps can protect against those parties looking to obtain a commercial advantage from administrative errors.
Jane Hughes is partner and head of construction at Collyer Bristow LLP
