Notice Clause

What is a notice clause?

A notice clause is a contractual provision that serves a basic but essential function by stipulating how and to whom notice must be given under a contract for it to be legally binding. Contracts will often specify notice periods for exercising rights under various provisions, including those for renewal, termination, default and assignment, and in all those cases notice must be given in accordance with the notice clause.

Why does the notice clause matter?

Because notice clauses are found in almost every kind of legal agreement, they are often overlooked during the negotiation process. While the notice clause may seem simple and straightforward, it usually contains detailed rules about the process for giving notice that must be strictly observed for the notice to be effective. These details become vitally important when one party needs to exercise rights under an agreement for which notice is a precondition. To illustrate, let’s say a small motor manufacturer is experiencing a supply shortage of copper wiring (a critical input for the production of its motors) because one of its suppliers is in breach of its delivery obligations under a supply contract. Before the manufacturer can obtain the benefit of any remedy under the contract (e.g., monetary damages to compensate for the disruption of the manufacturer’s business), it must provide notice of the breach and give the supplier 30 days to fix the problem. The manufacturer will want to provide this notice as soon as possible so that the cure period is triggered and either (1) the supplier corrects the problem within 30 days or (2) the manufacturer’s remedial rights crystalize at the end of the 30-day period. To ensure that notice is given in the appropriate manner for this purpose, the manufacturer will want to review the notice clause in the supply agreement and adhere to its requirements.

How do you review the notice clause in contracts?

In most contracts, the notice clause appears as a standalone section, making it easy to find. The key pieces of information to focus on when reviewing the notice clause are

  1. Who needs to receive notice. The notice section will provide contact information for each party and it may also include contact information for one or more parties’ legal advisors. Typically, the official notice is sent to the relevant party or parties with copies going to their respective legal advisors as required. Sending notice to the legal advisors only may not be sufficient for it to be effective under the agreement (example 3 below, for instance, makes this explicitly clear). Note, as well, that the contact information for the parties may be found elsewhere in the agreement and, in that case, the notice section will generally state where this information may be found (see example 5 below, where the provision directs readers to page 1 for Tenant’s and Landlord’s respective mailing addresses).
  2. The manner in which notice must be provided. Most contracts require notice to be in writing and then provide various options for effecting delivery – e.g., in person, by registered mail, by courier, by email, etc. The party giving notice can generally select one or more of these delivery options.
  3. When notice is deemed to be given for the purposes of the contract. This is perhaps the most critical aspect of the notice clause, as it provides certainty regarding the timing of the notice. Even if the intended recipient has not actually received the notice, the rules set out in the notice clause may nevertheless deem that notice to have been given. Example 1 below illustrates this by stating that notice sent by registered or certified mail is deemed to have been given three business days after being sent (and by implication irrespective of actual receipt). Where notice is being given pursuant to a provision in a contract that stipulates a notice period, these deeming rules also determine when the clock starts running. Returning to the example of the small motor manufacturer above, let’s say the supply contract states that notice sent by courier is deemed to have been given after one business day. Assuming all other notice requirements are followed, the 30-day notice period will start one business day after the manufacturer sends notice by courier to the supplier. Finally, it’s important for senders to anticipate issues that may arise with certain modes of delivery due to these deeming rules. A contract may stipulate, for example, that notice sent by electronic means, such as email or fax, is deemed to be given when received (see example 4 below). Because notice is conditioned on actual receipt, the sender may consider using an additional delivery method to mitigate the risk of technological issues preventing or delaying receipt of any such electronic communication.

Examples of the Notice Clause

Example 1: From a License Agreement

  1. Notice. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally, delivery charges prepaid, or three (3) business days after being sent by registered or certified mail (return receipt requested), postage prepaid, or one (1) business day after being sent by a nationally recognized express courier service, postage or delivery charges prepaid, to the parties at their respective addresses stated below. Notices may also be given by prepaid telegram or facsimile and shall be effective on the date transmitted if confirmed within twenty-four (24) hours thereafter by a signed original sent in the manner provided in the preceding sentence. Any party may change its address for notice and the address to which copies must be sent by giving notice of the new address to the other parties in accordance with this Section 16, except that any notice of such change of address shall not be effective unless and until received. If to Licensor to: Licensor Corporation, 123 Main Street, Anywhere, State 12345; with a copy to: Big Law Firm LLP, 567 Main Street, Anywhere, State 13579 Attention: Jane Lawyer. If to Licensee to: Licensee 345 Main Street, Nowhere, State 01010 Attention: General Counsel.

Example 2: From a Master Supply Agreement

  1. NOTICES. Any notice or other communication which may be permitted or required under this Material Supply Agreement shall be in writing and shall be delivered personally or sent by United States registered or certified mail, postage prepaid, addressed as follows, or to any other address as either party may designate by notice to the other party:

If to Supplier:

Supplier Inc.
123 Main Street,
Anywhere, State 12345
Attention: Chief Operating Officer

With a copy to:

Big Law Firm LLP
100, 234 Main Street W.,
Anytown, Province A1A 1A1
Attention: Joe Lawyer

If to Customer:

Customer Inc.
678 Main Street,
Anytown, Province A1A 1A2
Attention: Chief Executive Officer

Example 3: From a Share Purchase Agreement

10.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with confirmation of receipt) to the parties hereto at the following address (or at such other address for a party as shall be specified by like notice):

(a) If to Acquirer, to:

Acquirer, Inc.
123 Main Street,
Anywhere, State 12345
Attention: General Counsel
Facsimile No.: (123) 456-7890
Telephone No.: (123) 456-7890

with a copy (which shall not constitute notice) to:

Big Law Firm A LLP
567 Main Street, 10th Floor
Anywhere, State 13579
Attention: Jane Lawyer

and a copy (which shall not constitute notice) to:

Local Law Firm A
123 Uptown Road
Wherever 12345, Country
Attention: John A. T. Torney

(b) If to Target, to:

Target Ltd.
555 Main Street, 5th Floor
Fifthsville, State 02021
Attention: Chief Executive Officer

with a copy (which shall not constitute notice) to:

Big Law Firm B LLP
444 Main Street, 4th Floor
Fifthsville, State 02020
Attention: Joan L. Awyer

with a copy (which shall not constitute notice) to:

Local Law Firm B
789 Downtown Road
Wherever 23456, Country
Attention: Joe Lawyer

(c) If to the Agent, or the Target Shareholders (after Closing), to:

Agent LLC
456 Main Street, Suite 100
Nowhere, State 34567
Attention: Managing Director

Any notice given as specified in this Section 10.2 (i) if delivered personally or sent by facsimile transmission shall conclusively deemed to have been given or served at the time of dispatch if sent or delivered on a Business Day or, if not sent or delivered on a Business Day, on the next following Business Day and (ii) if sent by commercial delivery service or mailed by registered or certified mail (return receipt requested) shall conclusively be deemed to have been received on the third Business Day after the post of the same.

Example 4: From an Interim Services Agreement

  1. Notices and Communications.

All notices, demands, and communications required or permitted hereunder will be in writing and will be delivered personally, by facsimile, by email, by overnight courier or by registered mail, postage prepaid, return receipt requested to the respective representatives at Customer and Service Provider set forth below. Notices, demands and communications hereunder will be effective: (i) if delivered personally, on delivery, (ii) if delivered by facsimile, email or by overnight courier, upon receipt, (iii) if delivered by registered mailed, forty-eight (48) hours after deposit thereof in the mail addressed to the party to whom such notice, demand, or communication is given. Until changed by written notice, all such notices, demand and communications will be addressed as follows:

If to Customer:

12345 Main Street,
Anytown, Province
A1A 1A1

Attn: Chief Financial Officer
Fax: (123) 456-7890

If to Service Provider:

13579 Central Avenue
Anytown, Province
A1A 1A2
Attn: Chief Executive Officer
Fax: (123) 456-7890

Example 5: From an Industrial Lease

  1. Notice Procedure. All notices, demands and requests which may be or are required to be given by either party to the other shall be in writing and such that are to be given to Tenant shall be deemed to have been properly given if served on Tenant or an employee of Tenant or sent to Tenant by United States registered or certified mail, return receipt requested, properly sealed, stamped and addressed to Tenant at see page 1 or at such other place as Tenant may from time to time designate in a written notice to Landlord; and, such as are to be given to Landlord shall be deemed to have been properly given if personally served on Landlord or if sent to Landlord, United States registered or certified mail, return receipt requested, properly sealed, stamped and addressed to Landlord at see page 1 or at such other place as Landlord may from time to time designate in a written notice to Tenant. Any notice given by mailing shall be effective as of the date of mailing.