Notice: The Key to Staying On the Side of the Angels

Given that there is no perfect contract and that changing circumstances are inevitable, good contract management dictates that business professionals be actively involved in managing agreements after they are signed. The reality is that, once signed, contracts should not simply be filed and forgotten; but instead actively managed and administered from “cradle to grave”. When performing such active management, bear in mind that several different contract clauses may be relevant in dealing with a particular event. Let’s say for example that there is some failure to perform or breach. Such an event could implicate the scope of work, warranty, force majeure, and notice provisions. Let’s say that there is an issue as to whether extra work was performed. This issue would potentially implicate the sections of the contract pertaining to integration, changes, notice and scope. Likewise, a dispute over termination, whether for cause or convenience, would likely implicate the portions of the contract pertaining to cancellation, termination, notice, scope, close out responsibilities or renewal obligations. Personal injury or property damage would involve the sections pertaining to indemnification, insurance, notice, and independent contractor status. Clearly, a common denominator is emerging; namely, the all-important obligation, both as a matter of contract and good faith, to provide notice. Providing notice of a claim, breach, cancellation, change, or termination is the keystone to good contract management. The law (and judges) recognize the obligation to provide notice as fundamental to exercising one’s rights and remedies. It allows the recipient to respond, take corrective action, preserve evidence and presumably avoid or resolve disputes amicably, thereby conserving judicial resources. Providing notice is easy to do and the consequences for failing to do so can be severe. Make sure you and your colleagues follow the notice requirements as dictated by your contracts and the duty of good faith.

X. Paul Humbert, Esq. has over twenty years of legal experience in negotiating and structuring complex commercial transactions of all types. Mr. Humbert heads The Humbert Group (“THG”), specializing in assisting management professionals in all phases of execution and process improvement. In addition to full-time consulting for both public and private clients, Paul lecturers at Rutgers University where he teaches Contract Management to MBA candidates. Paul’s books include: Contract and Risk Management for Supply Chain Professionals; Model Contract Terms and Conditions with Annotations and Case Summaries; Build Your Playbook for Managing Supply Chain Transactions; and How to Analyze and Negotiate Warranties for Goods and Services.