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March 22, 2020

The Coronavirus Crisis—Consider Your Contract Notice Provisions in Light of Office Closures

Coronavirus: Corporate Advisory

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With the spread of COVID-19, more and more businesses are closing their offices, either voluntarily or as required by law, and are activating their business continuity plans. Those plans contemplate remote working and describe how to continue operations outside of the office. Often overlooked, however, are some of the less obvious repercussions of losing access to physical locations, mail and fax machines.

Contracts often contain notice provisions setting forth the permitted methods for the parties to contact each other. Even in today's digital age, those terms often provide that a notice is deemed received a certain number of days after deposited in the mail or with an overnight delivery service, or upon confirmation of delivery of a fax. If an office location is closed, and mail and incoming faxes are not forwarded to the appropriate person, notices may sit, unopened, even though the contract deems them received.

Missing a properly delivered notice could have severe consequences. Of particular concern are provisions that specify the number of days in which the counterparty must respond. For example, a contract may contain a provision that requires or permits a party to send notice of a dispute, which in turn triggers a period during which the counterparty must respond. If the counterparty does not timely do so, the contract deems the counterparty to have consented to the disputed issue or waived any objection.

Anticipating that parties relocate, or that the business's personnel or counsel can change, notice provisions often permit the parties to update their contact information. This is the time to do so. We recommend you review your critical contracts and amend notice provisions, where appropriate, to reflect your business's virtual operating status. Businesses that provide their employees with remote access to email should require notice by email, possibly to more than one employee to provide redundancy. Methods of delivery that do not provide reasonable assurance of actual receipt of notices by an individual able to deal with them, including mail to a closed office or faxes to an unattended fax machine, should be removed (unless coupled with a requirement that a copy be sent by email to designated email addresses). In addition, all notice provisions for critical agreements should require that a copy of notices1 be sent to outside counsel, preferably by email to individuals whom you know to have remote email access, so you have a second party (outside of your office) able to receive these notifications and alert you to them.

Finally, a party that needs to give a notice should not assume that a court would give effect to a notice that it knows or should know will not be received by the counterparty even if it is given in a manner permitted by the contract. It may be prudent to both give the notice in the manner specified in the contract and informally in a manner for which you can confirm receipt.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. The notice provision should specify that only a copy of the notice should be sent to your outside counsel and such copy shall not constitute delivery to you under the agreement.