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Can an email serve as a good notice under a contract?

Technology is becoming increasingly popular and dominant, and individuals and businesses now rely on email as a main form of communication.  However, can an email be a valid method of serving a notice under a legal contract?  This issue was recently considered by the Supreme Court of NSW in Kegran Pty Ltd v Warrik Pty Ltd [2018] NSWSC 1357.

Facts

This case relates to the exercise of an option to renew a commercial lease.   The lease relevantly granted the tenant an option to renew for an additional 5 year period subject to the tenant giving the landlord notice no less than six months before the expiration of the initial term.

However, the lease also provided that any notice must be addressed to the landlord and would be "sufficiently served if it was served personally, sent to the lessor's facsimile number or sent by prepaid post".  Importantly, this section did not allow for notices to be served by email.

Approximately 7 months before the expiration of the lease, the tenant purported to exercise an option to renew a commercial lease by way of an email to the sole director of the landlord.  On this basis, the landlord disputed that the notice was not validly served under the lease on the basis that, amongst other things, the contract did not allow notices to be served via an email.

The tenant subsequently commenced proceedings in the Supreme Court of NSW seeking specific performance of the option to renew provision of the lease.

Decision

The Court found that the language of the notice provision was 'facultative', but not 'mandatory', and therefore it did not prescribe an exhaustive list of the available methods of service. On this basis, the Court held that an email was a satisfactory method of service in the circumstances and, that the option to renew was validly exercised as it was addressed to the sole director of the landlord and served within the prescribed timeframe.

Conclusion

This significance of this case is that it highlights that the valid exercise of notice depends on the interpretation of the terms of the lease, or indeed any other contract, as a whole.

It is important to note that although the use of technology and electronic communication is becoming increasingly popular, it is imperative to carefully review the terms of the  agreement when determining how notice can be served and whether or not it can be validly served by way of email to avoid the risk of losing the benefit of a contractual rights, such as an option to renew.

This article was written by Associate David Addinall.

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