Where a contract sets down requirements for the service of notices under it, it is essential to comply with them strictly. Lord Hoffman famously said in Mannai Investment Co Ltd v. Eagle Star Life Assurance Co Ltd: "If the clause had said that the notice had to be on blue paper, it would have been no good serving a notice on pink paper, however clear it might have been that the tenant wanted to terminate the lease."
The Mannai case (which concerned a break clause in a lease) provides an exception to this general rule. Minor defects in unilateral contractual notices will not necessarily invalidate the notice if the reasonable recipient, with knowledge of the factual and contextual background, would not be confused by the error (the Mannai Principle).
However, the Mannai Principle only applies to construction of the notice. It does not apply to deviations from the prescribed form of a notice. It also does not apply to requirements about service of a notice. If the methods by which a party should serve a notice can be said to be "mandatory" rather than "permissive" the courts will interpret them strictly. A notice which does not comply with the mandatory methods will be invalid.
Service by email
Nowadays it is common for commercial parties to correspond using email. It is therefore probably unsurprising that contracting parties also want (or can assume the contract gives them) the ability to serve formal notices by email.
In recent years the courts have considered whether the notices clauses in standard form financial contracts include service by email. The 2014 case of Greenclose Limited v. National Westminster Bank plc1 hinged on whether a notice served by email complied with the notice requirements of the 1992 ISDA Master Agreement (1992 ISDA). More recently, in Lehman Brothers International (Europe)(in administration) v. Exxonmobil Financial Services BV2 (LBIE v. Exxonmobil) the High Court looked at the notices clause under the 2000 version of the Global Master Repurchase Agreement (GMRA).
In Greenclose NatWest tried to exercise a contractual right to extend an interest rate collar documented under a 1992 ISDA governed by English law. Section 12(a) of the 1992 ISDA governs the service of notices. It states:
"[a]ny notice or other communication in respect of this Agreement may be given in any manner set forth below…to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated." Then, set out below are the methods for serving notices (in person, courier, telex, fax, courier or registered post and electronic messaging system).
The court held that, despite section 12(a) referring to the fact notice "may be given", the methods of service listed in section 12(a) were mandatory. It also held that the term "electronic messaging system" did not include email. Relevant to the court's interpretation was that email was not widely used in 1992. Also, the 2002 ISDA Master Agreement draws a distinction between email and electronic messaging system. The judge said this was "designed to make it plain that email was not encompassed within the expression 'electronic messaging system'" in the 1992 ISDA.
LBIE v. Exxonmobil
Contrast LBIE v. Exxonmobil which concerned a default valuation notice served under the GMRA. Paragraph 14(b)(v) of the GMRA states that notices are effective if they are sent by "electronic messaging system". On an obiter basis Mr Justice Blair said "[as] used in the GMRA 2000, there is no reason why this phrase should not include email". In making this statement he distinguished the Greenclose decision. Unlike the 1992 ISDA, Annex 1 of the GMRA expressly contemplates the delivery of notices by email by including email addresses as a contact detail for notices. He said: "[t]here would be no reason for including email addresses in Annex 1 of the GMRA if notices could not validly be sent by email, and in my view they could be."
Close of business
LBIE v. Exxonmobil also highlights that if the parties intend a notice to be received before a certain cut-off time, it is always prudent to be specific about what that time is.
Paragraph 14(b) of the GMRA provides for the time when notices of termination are effective. In particular, where a notice is received, or delivery of a notice is attempted after "close of business" on the relevant date, it is treated as having been given at the opening of business the following business day.
Exxonmobil's default valuation notice had arrived at LBIE's London offices at 6.02pm. For the notice to be valid, Exxonmobil needed the court to confirm that it had arrived before "close of business" on that day.
Mr Justice Blair made it clear that the meaning of the term "close of business" would vary according to the context. He said: "[i]n the context of financial business of the kind at issue in this case, repo financing extended by an oil major to an international investment bank, a reasonable person might be surprised to hear that business closes at 5pm."
Here the onus was on LBIE, as the party alleging that the notice arrived too late, to prove when close of business occurred. However, LBIE did not produce any admissible evidence on when that occurred, so the court decided the issue in favour of Exxonmobil.
Where parties want to be able to serve notices under a contract by email it is safest to ensure that the notices clause specifically refers to service by email.
Also, regardless of the method of service, where the cut-off time for delivery of a notice is critical, parties should be wary of relying on phrases such as "close of business". As Mr Justice Blair observed in LBIE v. Exxonmobil, "[w]here the intent of…a contract is to impose a definite cut-off time…, it can do so expressly".
Law stated as at 6 December 2016.