Sunday, February 13, 2011

Negotiation - Thoughts on Negotiating Notices

In every contract certain notices may be required.
·       For breach of the agreement (a cure notice)
·       To terminate the agreement for breach (if they fail to cure)]
·       To terminate without cause
·       To cancel or reschedule an order
·       To end of life a product or service
·       For any lead time changes
·       For product or service changes
·       For other changes, such as location work is performance, change to subcontractors or material suppliers.
·       For the exercise of options, such as extension of the term.
·       To advise the other party that a condition precedent or condition subsequent has been met
·       Notices of shipments or pulls
·       If you have a self extending agreement, notice is required to advise the other party of the intend to not have it self extend.

Most notice provisions simply address:
1.     The party that notices must notified.(As people change its wise not to specify a specific person. You could list a person or their successor or you could list a specific position title of Group).
2.     How notices must be communicated. (Some notice may require a formal writing that is sent by a means showing proof of delivery other notices may be agreed to be sent electronic such as EDI signals).
3.     When notices are effective (posting or receipt). (This is determines when the period provided for in the Notice commences)

Individual sections that contain notice requirements will specify the minimum period required before the action described in the notice can take effect.  For example if you agree to a thirty-day cure period for breach, the Supplier has 30 days in which to try to cure before a termination notice can be given. After sending a notice to cure a breach, the Buyer is not obligated to terminate the agreement. If they choose to terminate the agreement, the termination notice does not have to terminate the agreement immediately.  A termination date in the future may be specified. The party providing notice may provide a longer period than is required by the contract, they just can’t provide a lesser period.  Notices may also be for rights or duties. For example, if a Supplier had a right to end of life a product or service and the contract required six months notice, they could provide a year's notice if they wanted.  If the provision of a notice is a duty, that requires a notice. If notice is tied to a right, the party with the right does not have to exercise the right or provide notice if it opts not to exercise the right.  

For a notice to be effective, it must follow the agreed requirements for its delivery that are defined in the Agreement. If it doesn’t, technically the notice never occurred, and if the notice never occurred, what you were trying to protect (like an option) wouldn’t be protected or what you were trying to manage (like a termination) wouldn’t be recognized.   

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