Most commercial contracts include provisions dealing with notices. What is the position, however, if an agreement refers to notices without specifying how or in what form they must be given? In Gerson (Leasing) Ltd v Greatsunny Ltd [2010] PLSCS 168, the court was asked to interpret an agreement made between a landlord and an equipment leasing company.
In the agreement, the landlord undertook that in the event that it terminated a lease to its tenant it would “give notice of the termination” to the equipment leasing company, followed by 28 days in which the company would be entitled to remove the equipment from the premises (because, once installed, the equipment would become part of the premises). Unfortunately, the tenant fell behind with payments to both the landlord and the leasing company and went into administration.
The landlord informed the company by telephone that it had re-entered the premises and terminated the lease. The company argued that it had retained its rights over the equipment, even though it had allowed several months to elapse after the telephone call. It claimed that the oral notice given by the landlord was insufficient to notify it that the clock was ticking and that it could lose its right to remove the equipment.
The judge reminded the parties that, under the common law, a tenancy can be determined by an oral notice to quit and that, if a contract is silent, the court will not presume that notices must be in writing. The judge accepted that, in some cases, the context or the words used in an agreement have indicated that notices must be in writing. For example, if an agreement refers to a notice being “served”, the court will construe this as meaning that it must be in writing because, as a matter of ordinary language, oral notices can be given but cannot be served.
The equipment leasing company relied on section 196 of the Law of Property Act 1925, which provides that “any notice required or authorised to be served or given by this Act shall be in writing”.
The judge ruled that if the equipment leasing company were correct, any notice given under an agreement relating to property would have to be in writing. Section 196 was enacted to facilitate the service of notices. It applies where it is already a term of the agreement that notices must be in writing and does not provide that notices must always be in writing. There was nothing in the circumstances of this case to indicate that written notice was required. Consequently, the landlord’s oral notice was effective.
This case illustrates the importance of including notice provisions in agreements. In addition to stating that notices must be written, most well-drafted contracts will identify who can serve and receive them. Some contracts also deal with how notices can, or indeed must, be served, and may include additional provisions stating that notices will be deemed to have been served if the parties giving them comply with certain conditions.
Allyson Colby is a property law consultant
