Why is important a "notices" provision in your contract?

By The Law Office of Yoel Molina.

Contract drafting is an art form and every contract provision has its TBD (to be determined) date for completion.

Sometimes that date is set months or even years in the future. But one of the most frequently used contract provisions allows parties to bind themselves to acts or obligations that must be performed or exist at a specific date in the past. This “notices” provision requires that any notice, demand, report, or other item required by the contract must be provided or filed on or before a specified date.

Because of the role, that time plays in so many contractual rights and obligations, this “notices” provision is vitally important because it ensures that all parties know the significance of the date and have a set time frame in which to take action. This provision is so important that many contracts have a whole separate schedule of dates, often titled “Notice Dates.”
 

​The power of notices: Why do they matter more than you might think?
 
Defaults in a contract: The terms “breach,” “default,” and “termination” must be clearly defined so that both parties understand their rights and duties. Termination takes one of two forms: immediate or future-oriented. An immediate termination provides that the agreement terminates immediately upon a party’s breach or default. A future-oriented termination allows the breaching party to cure its default. However, if it fails, then the agreement terminates immediately. As with other project management elements, termination procedures must be clearly defined. These include who will notify the other party of the termination, whether confidential materials need to be returned and if so by what time frame, and the consequences for non-completion of remaining obligations. Both parties must understand their obligations once the agreement has been terminated. An ongoing relationship between the parties is not uncommon, even after an agreement has been terminated. Sample provisions will help create well-written agreements.

Offer and acceptance in negotiation: When negotiating, one party typically proposes a deal by sending a written offer or indicating a recommended deal structure. Alternatively, the other party may announce a counteroffer. When negotiating by email, it is common practice for both parties to reset the writing by sending an acceptance notice of the other party\'s previous offer. However, in some circumstances, it may be advantageous not to accept the previous offer, but instead to propose a new deal or escalate the level of concession. Whether and when to get the other party\'s offer is often a central issue of the negotiation strategy.

Deadline renewals: Sometimes these provisions are included in agreements for the sale or transfer of goods. These provisions are sometimes called “deadline renewals” because the 30-day notice required to terminate the agreement or extension must be delivered prior to the specified date in order to avoid either termination of the then-current term or an extension of the then-current term, as applicable. The question often arises as to what constitutes proper notice under one of these provisions. In many cases, the general terms and conditions or general provisions of the agreement will specify which part of the agreement is intended to govern notices relating to this specific term. However, sometimes the general terms and conditions or general provisions don’t specify which part of the agreement is intended to govern notices relating to this specific term. When this is the case, the part of the agreement that is deemed to constitute the terms and conditions generally, or the general provisions, will depend on a number of factors, including: (i) whether the clause that expressly provides for deadline renewals; (ii) whether other clauses in the same agreement contain any other deadline renewal provisions; and (iii) the relative position of the clause that is alleged not to set the terms and conditions generally or the general provisions relative to the other clauses in the agreement that contain deadline renewal provisions.

Assigning and amending contracts: An amendment is generally intended to make a contract fit a changing situation. For example, if the floor size in a new building has changed since the contract was made, and the subcontractor is getting an unreasonably small portion of the floor for his buck, the general contractor might agree to amend the subcontract to reflect the new floor dimensions. Alternatively, if a certain kind of stainless-steel finish on kitchen cabinets is no longer available and it was part of the specifications in the contract, the price, or an agreed-upon portion of the price, might be allocated to remedying the lack of availability (perhaps thereby enabling the subcontractor to finish his part of the job) and toward completing other demanded items that would enable the contractor to finish its portion of the job. An assignment is when the rights under a contract are transferred to another party. Depending on the circumstances, this could be ominous or portentous. A young startup, for example, might assign part of its contract with a supplier in an effort to get credit to keep the company afloat while it seeks to acquire the funds necessary to continue operations. (See also, How to Get a Business Loan.) Alternatively, an overly dominant general contractor might attempt to assign all or part of a subcontract to another party in order to cut out the subcontractor completely and retain more money for the general contractor. Depending on the wording of the contract, this might be legal or illegal. If the contract contains language that allows the general contractor to assign the agreement (subject to certain provisions), then the contract has been lawfully assigned. However, if the contract does not allow for an assignment without the consent of the subcontractor, then the general contractor has attempted an unlawful assignment.

Quickly and easily terminate a contract: When faced with a termination clause in an agreement, think about the future and whether and when you might want or need to terminate the agreement. Will the other party be amenable to your planned course of action? Or will you run into difficult, expensive, or even impossible barriers? If the agreement includes termination provisions that are unfavorable to you, can you anticipate when you might need to terminate the agreement and potentially adverse consequences and mitigate them while the agreement is in effect? Consider all angles and provisions when drafting a contract, both your own and those of another party, and you will gain a better understanding of the best (and worst) ways to bring that contract to an end.

If you have any questions about this article or similar matters please contact our office, Law Office of Yoel Molina, P.A., at fd@molawoffice.com or at 305-548-5020, option 1