In Hoe International Ltd v Anderson & Aykroyd, the Court of Session confirmed that failure to comply with the precise terms of mandatory notice provisions in an agreement will result in the notice being considered invalid.
The Facts
Hoe International Ltd entered into an agreement with Martha Anderson and Sir James Aykroyd to purchase the entire share capital of Speyside Distillers Company Ltd. As part of the deal the sellers had to disclose to Hoe any disputes which the company was involved in.
The sellers acknowledged that there had previously been a dispute with a company called Chambers Finance Ltd but, as far as they were aware, the matter was at an end. To deal with the eventuality of Chambers pursuing their claim, a warranty was included in the agreement which required the sellers to confirm that Speyside had no further liability to Chambers. The agreement included a further provision requiring the purchaser to notify the seller in writing as soon as reasonably practicable after it became aware of any claim covered by the warranty.
Unfortunately, the sellers' belief that the dispute with Chambers was at an end proved to be wrong. On receipt of Chambers' letter of claim, Hoe's solicitor duly notified the sellers' solicitor of the claim. After settling the case against Speyside out of court, Hoe sought to enforce the warranty against the sellers. It was at this point that a problem arose.
The sellers contended that they had no liability to Hoe as a valid notice had not been served. The agreement set out in minute detail how notice was to be given to the sellers, amongst other things, requiring all notices issued to be hand delivered, sent by pre-paid first class post or recorded delivery, but specifically excluding email. Hoe had not done this. Instead they had sent it by DX delivery and by email.
Lord Woolman concluded that the agreement between the parties clearly set out how the notice was to be delivered. The agreement set out in detail how a notice was to be served. Delivery by DX or email was not an option available under the agreement and accordingly, the notice to the sellers was not valid.
Comment
This case offers a reminder of the importance of strictly following the wording and not the spirit of an agreement, particularly when dealing with notice provisions. It matters not that the letter was received and understood. The failure to comply with the strict terms of the agreement rendered the notice, and the claim, invalid.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
