Contract Drafting Fundamentals – Modernizing Notice Provisions

When I was a child, I was excited to learn a new piece of music. That process started with an excursion to Stanton’s sheet music store. Even though Stanton’s was only a few miles from my home, a trip there was a much-anticipated excursion.

As a young musician, when I walked through Stanton’s doors, I entered a magical wonderland with endless rows of music organized by instrument and composer. With its vast stock, Stanton's usually had the music I needed. But if it didn’t, the store could order it and have it for me – usually within two weeks.

For me, a trip to Stanton’s was like a trip to a candy store. I spent hours looking at sheet music. Without online music libraries, by perusing Stanton’s racks, I became familiar with repertoire I wanted to “consume.”  The lure of the music was irresistible, and I rarely left with only the music I came to purchase.

John Stanton, a band director, started the music store in the 1950s as a sheet music store inside an instrument retail store. Catering to music teachers, by the early 1960s, it was the only music store in the state that stocked all music on the music teacher’s association’s solo and ensemble list. In the early 1970s, Stanton's had expanded to where it needed to move to its own two-story building.

In the late 1970s, long-time employee John Strouse purchased the store and expanded into a former furniture store, and in the early 1980s, Stanton’s expanded further into its own building. Stanton’s employees traveled to regional and national music conventions to build a national mail-order business.

Online shopping marked the end of many local music stores, but not Stanton's. In the 1990s, the store launched stantons.com. The website evolved beyond selling sheet music to become an online music experience, including digital features so musicians could listen to music and even entire proposed concert repertoire before buying. And in the 21st century, as musicians began using iPads to store their music, Stanton’s offered digital delivery to meet that demand.

Stanton’s has survived for nearly 70 years when many music stores failed because it anticipated and accommodated music teachers’ evolving needs. And unlike some traditional music stores, Stanton’s wasn’t afraid to embrace technology to accelerate its success.

Unfortunately, when preparing contracts, attorneys frequently cling to notice clauses dating to the 1980s – even when their clients have evolved. This article discusses how when preparing contracts attorneys can bring their notice clauses into the 2020s.

What are Notice Provisions in A Contract?

Notice provisions are contract terms that describe the procedure parties must follow when notifying each other about important contract developments. Most contracts have a general notice provision that describes who receives notice and the method by which notice may be provided. Often notice provisions tell when the notice will be effective if not upon delivery.

Notice provisions should include the name of an individual to receive notices. For a real estate contract, that typically would be an executive or the project manager for the party. Since people can leave their positions, go on vacation, become ill, or overlook a notice, I recommend that the notice go to at least two individuals, preferably at two different locations. Often parties accomplish this by having notice go to both the party’s representative and its attorney.

Notice Provisions How, When, and Where

Notice provisions also should state how and where notice can be given and when it is effective. These three terms are related. For instance, if notice is given via USPS first class mail, a mailing address would be where the notice would be delivered. But, if notice is to be given via fax, a fax number would be where the notice would be sent.

When notice is effective is related to how notice can be given. Traditionally, notice provisions required notice by US certified mail return receipt requested or by registered mail, which can track when delivery occurs.

Registered mail originally was designed for the delivery of valuable documents and objects and automatically tracks the mailed item at each stop along the way and upon delivery. Certified mail isn’t tracked at each stop. However, if a return receipt is requested, certified mail will require a signature on a green postcard upon delivery. The postcard is returned to the sender via USPS first-class mail to provide a record of delivery.

Notices sent by those methods needed to be delivered to a mailing address, which could include a P.O. box. Harkening back to the days when many people did business in person, hand delivery was usually permitted. Hand delivery could be delivered to the recipient where they were found – at work, home, or even on the golf course. Delivery to a business without naming an individual would go to the business's location.

By the 1990s, contracts commonly permitted notice via overnight delivery services, such as FedEx and similar services, which also track when delivery occurs. So, contracts usually say that notices sent by these methods are effective when the notice is delivered to the recipient. Since those services can’t make deliveries to P.O. boxes, the contracts needed to state a street address where notices were to be delivered.

But where contracts permit notice via USPS first class mail, the delivery date wouldn't be tracked. For notices sent by first-class mail, based on the assumption that most mail is delivered within three business days, contracts commonly make notice effective three business days after the letter is mailed.

By the 1980s, fax machines were ubiquitous in business. There was concern that a recipient might not physically receive a fax since fax machines sometimes jammed or faxes misdelivered in a large office. However, by the late 20th century, many contracts permitted fax notices.

Writing a 21st-Century Notice Provision

In the 21st century, business increasingly has been conducted via email. Around the same time, many businesses moved to electronic fax accounts, so faxes were delivered by email rather than sent to a fax machine that printed out the notice. So, by the 2010s, most contracts permitted parties to send notices via email in addition to fax.

However, with spam filters and the possibility of an email being overlooked, contracts frequently required duplication of the notice via overnight delivery to be sure the recipient saw the notice. As a result, email notices didn't save money or increase efficiency. Still, there was a time benefit to email notices. That’s because contracts usually provided email notice was effective when the email was sent, even though the overnight delivery would be delivered the following business day.

The pandemic catapulted even the most resistant business into electronic document delivery via portals and electric signatures through DocuSign, Adobe Sign, and similar platforms. With many workers working remotely, USPS first-class mail and even FedEx deliveries to the company's offices might not be received for several days when someone visited the office to pick up mail.

Despite the monumental change in how companies do business, most notice provisions remain unchanged. Typical notice provisions continue to allow notice by hand delivery, certified or registered mail, overnight delivery, and email (with a follow up via overnight delivery). Many also continue to allow notice via fax.

Even before the pandemic, some of these delivery methods were outdated. Offices have moved away from fax machines in favor of email. Many businesses no longer have physical fax machines. Instead, their fax numbers are electronic fax accounts that feed into the recipient's email. Knowing this, several years ago, I started omitting fax delivery of notices in contracts.

Notice by US mail also has become obsolete. I haven’t sent a contract notice via US mail since the early 2000s unless I had no other option. Certified and registered mail take several days to deliver and several additional days to receive the physical postcard back (although some USPS deliveries now can be verified online). Those methods don’t work for transactions that are being conducted via email delivered instantaneously. So, in the 2010s, I started omitting registered and certified mail delivery from real estate acquisition and other contracts I expect to operate in a tight time frame.

Hand delivery also doesn’t make sense in interstate or global transactions. When parties are all in the same geographic area, hand delivery via courier remains a viable option. However, if the parties and their attorneys are in numerous cities across the country, requiring either email or overnight delivery services makes more sense.

I currently include only overnight delivery services and email delivery in most of my contracts. For email, the delivery is effective only if there is no bounce back. Where each party’s notices go to multiple recipients on different email platforms (minimizing the risk of being caught in spam filters), I often don’t require a duplicate follow-up notice via overnight delivery.

What’s Next?

Stanton’s remained in business because it recognized and anticipated technological advances. Likewise, contracts should adapt to evolving business needs.

Despite this, contract notice provisions have lagged behind business practices. Antiquated contract notice provisions are particularly noticeable given the rapid changes in business practices necessitated by the pandemic.

The next step in notice delivery is secure portals. Title companies and financial institutions typically deliver notices via an online portal. My law practice offers secure portal communication to its clients. But nearly all clients eschew the additional security a portal provides for their privileged communications in favor of the convenience of email.

Nevertheless, most of my transactions involve document exchanges via a cloud service such as SharePoint, Dropbox, or Box. Even where those systems don’t have a designated message system, they can be set up to notify parties of updates to particular folders. So, a “notice” folder could be created and programmed to push an email notification to subscribers when a notice was uploaded.

In the 2020s, contract notice provisions should authorize notices via email and secure portal. If the parties have consistent physical addresses (versus being comprised of remote workers), then overnight delivery services also make sense. And if the parties are all in the same geographic area, hand delivery might continue to be practical. However, it's time to eliminate fax and USPS delivery (except perhaps overnight delivery service)l from contracts.

© 2023 by Elizabeth A. Whitman

Any references clients and their legal situations have been modified to protect client confidentiality

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