How safe is it to use email as a means of communication for formal notices under contracts? Some recent cases highlight some unintended outcomes and risks.

Contracts which expressly permit the giving of notices by email typically deem the notice to have been received at:

(a) the time the email is sent by the sender;

(b) a specific period after the time it is sent by the sender; or

(c) the time shown on a "delivery receipt" received by the sender.

There are potential issues with all of these methods and no easy solutions.

For option (a), any delay between when the email is sent and when it is received is not accounted for, so what happens when the email is not received the instant it is sent? For option (b), what if the email is received after the specified period or not received at all? In both cases, it would be unfair on the recipient to deem the email to have been received before the recipient could have received it.

While option (c) overcomes these issues, it creates a problem for the sender, as recipients can set up their email systems so that delivery receipts are never issued, even if the sender requests one. How then does the sender prove the time of receipt?

Electronic Transactions Act 1999 (Cth) – risks

This Act (and its state counterparts) provides some rules for determining when emails are taken to have been received. It says that, unless the parties agree otherwise:

  • if the email address is set out in the contract, the time of receipt is when the email enters the recipient's mail server; and
  • if the contract does not designate an email address, the time of receipt is when it comes to the attention of the recipient.

But do these rules adequately protect the interests of both senders and recipients of emailed notices? Consider the following:

  • What if the sender gets a response from the recipient's email server saying that the email could not be delivered because it was too many megabytes?
  • What if the sender gets an "out of office" response?
  • What if the recipient has left the organisation?

In each case, the email has entered the recipient's mail server, but it has not, or may not have, been received by the recipient. If the email address was set out in the contract, should the recipient be deemed to have received the email in each case? If so, how does the sender prove the time of receipt in the third scenario if it doesn't receive a "delivery receipt" from the recipient's server?

The Reed Case – time of receipt of email remains unresolved

Reed Constructions Pty Limited v Eire Contractors Pty Limited [2009] NSWSC 678 concerned a construction contract for civil works based on a NSW Government standard contract, GC21, which permitted service by email. The time of receipt of an email attaching a payment claim was crucial to the validity of an adjudicator's determination under the Building and Construction Industry Security of Payment Act 1999 (NSW).

The New South Wales Supreme Court considered the abovementioned rules in the NSW version of the Electronic Transactions Act. The court concluded that a payment claim could be served by email, and that, by virtue of the Act, the time of receipt was when the email was received by the recipient's email server.

The recipient of the email wanted the court to conclude that the email was received on 6 November, and not 7 November as determined by the adjudicator. There was evidence before the adjudicator and the court that the email was sent by the sender on 6 November, and that it was read by the recipient on 7 November. However, the recipient failed to produce any evidence that the email was received by its email server any earlier than 7 November. Consequently, the court refused to overturn the adjudicator's decision that the email was received on 7 November, and the adjudicator's determination against the recipient was valid.

While this case is not an example of a sender unable to prove the time at which an email was received by the recipient's server, it does illustrate how the deemed time of receipt of an email notice can be critical to the outcome of a claim.

The Kavia Case – email is a valid form of service of notices

If a contract is silent on the issue of notices by email, the question is then: Does a notice sent by email satisfy the requirements for a valid notice set out in the contract? This question was considered in Kavia Holdings Pty Ltd v Suntrack Holdings Pty Ltd [2011] NSWSC 716. The provisions of the contact in question required that all notices:

  • "shall be in writing";
  • "may be given to or served upon a party"; and
  • "may be signed on behalf of the party giving the same by a director, manager, secretary or acting secretary of such party".

The court decided that the relevant notice, which was sent by email, satisfied these requirements because the mandatory requirement as to writing was satisfied and the two permissive requirements were also met by transmission of the email and inclusion of the sender's name and email address. The view was that: "Any other conclusion would produce a capricious and commercially inconvenient result that might have wide-reaching and unintended consequences in modern day trade and commerce."

This decision is consistent with Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR 141 where the provisions of the contract (and also the relevant legislation) were permissive regarding notices and the Victorian Supreme Court decided that service of a notice by email was valid.

The Bauen Case – unexpected time of receipt of email

In Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123, the Supreme Court of New South Wales had to determine the time of receipt of an email of an adjudication response under the Security of Payment Act. The adjudication response was sent by email on 21 June 2012 to Adjudicate Today. However, Adjudicate Today was unaware of the email until 12 September 2012, when it discovered the email was caught in its spam filter.

The court decided that the word "lodged" in section 20 of the BCISPA meant "presented" and relied on the rules in the Electronic Transactions Act to establish that receipt was when the email was capable of being retrieved by the recipient, meaning it was not necessary for it to be opened or read. Accordingly, Adjudicate Today had received it and was able to access it on 21 June 2012 which meant Bauen had lodged the adjudication response in time.

Luckily for the sender, the recipient of the email disclosed evidence that the email was caught in its spam filter and, therefore, had been received by the recipient's email server. Had the recipient not done so, the sender may not have been able to prove that it had been sent in time.

What should you do?

There is no easy answer to the question of when a contract should deem a notice sent by email to have been received. Some approaches (such as the time it is sent by the sender) work for the sender, but can be unfair to the recipient. Others, such as those set out in the Electronic Transactions Act work for the recipient, but can be unfair for the sender.

The simplest "fair" solution is for the contract to expressly prohibit the use of email as a form of contractual communication and to rely instead on more traditional means of giving contractual notices.

If you really want to be able to use email as a form of issuing contractual notices, you need to think carefully about when an email should be deemed to have been received, and about your ability to prove the time of receipt. You should also consider permissible formats for attachments to emails, to ensure you don't receive attachments which require software you don't have. Your contract should include clear rules in relation to these matters.