Saving defective notices: when a non-specific letter can be a termination notice

Saving defective notices: when a non-specific letter can be a termination notice

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Author: Paul Scott

In Vivergo Fuels Limited v Redhall Engineering Solutions Limited, the Technology and Construction Court found that a letter could constitute a valid notice notifying a breach even if it did not expressly refer to the relevant contractual provisions.

It is a generally accepted principle that minor defects in a notice will not necessarily invalidate the notice.

In Vivergo, the court restated the relevant principles as follows:

  • "notices are to be construed in the same way as contractual documents", namely they should be construed "objectively against the background or.objective contextual scene" known to both parties
  • "the relevant meaning...is the meaning that a reasonable recipient would have understood by the notices", but such person will be deemed to have knowledge of the relevant provisions of the contract
  • "the purpose of the notice is relevant to its construction and validity". A clear purpose will lead the court to ignore "immaterial errors which would not have misled a reasonable recipient"
  • a notice "must be sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when the notice is intended to operate"
  • where a default notice and then a termination notice is required, "the two notices must be connected both in content and in time"
  • "the notice must notify the default", but it must contain something that indicates "the seriousness of the situation" or links to the relevant clause in the contract so that a reasonable recipient would realise what it is. However, the background known to both parties may provide the relevant indication or link

In Vivergo, the contract required the employer to give the contractor notice of a failure to proceed regularly and diligently, and to give it a period of 14 days to commence and diligently pursue the rectification of the failure before terminating the contract.

The court found that although letters sent by the employer did not specifically refer to the relevant termination clause in the contract, it was prepared to construe one of the letters as a valid notice. This was due to the letter using a phrase that was taken directly from the relevant clause of the contract, linking this to a relevant default under the contract and, in the relevant background context, the contractor being aware of the employer's threats to terminate the contract.

However, in construing the context of the relevant letter, the court was not prepared to find that other defaults had been notified to the contractor as it decided that the context and content of the letter did not allow this (such as the title and the general content of the letter referred only to one specific default).

Although Vivergo reaffirms the principle that certain defects in a notice may not necessarily invalidate the notice, the court's decision highlights that care should be taken to ensure that the proposed notice contains all the relevant details required by the contract and expressly refers to every event or default that the notice concerns.

A failure to do this can result in a notice being invalid or not covering all of the events upon which the party serving the notice wishes to rely. Given the consequences of a wrongful termination, ensuring the relevant notice is correctly drafted is of the utmost importance.