With businesses conducting the majority of their day-to-day communications by email, it can be easy to assume that email will be a valid form of communication under a contract. However that will not necessarily be the case, and if emails are not allowed, this can potentially have major consequences for the sending party.
When does this question arise?
This question arises where one party wishes to exercise a right under a contract, and the other challenges the validity of the notice. For example, the notice might be:
- a claim for payment;
- a claim in respect of a variation or change order;
- a claim for an extension of time;
- the exercise of an option or other contractual right;
- a notice of terminating the contract; or
- a notice of dispute.
If a notice is not given in the required manner, it may not be effective – which may result in the sender effectively losing the right it was attempting to exercise, or otherwise have some other adverse consequence.
Can notices be sent by email?
It depends on the circumstances and the nature of the contract.
Most of the time the question will be answered by the terms of the contract itself.
There can be circumstances where, because of a pattern of conduct between the parties, an email might be taken to be valid despite the terms of the contract.
Invariably however, the terms of your contract will always be the best place to start.
What does the contract say?
Your contract may include a notice provision that addresses some or all of the following information:
- how notices may be sent (post, email, fax, hand delivery etc);
- where notices should be sent;
- when a notice will be taken to be received; and
- any exceptions.
A contract which allows the use of email will often include exceptions for specific notices and require these to be sent by another method. For example a contract may require that a notice of dispute be delivered by hand or registered mail.
Some contracts may expressly permit the use of email, while others may expressly prohibit it.
If a contract is silent on the use of email, or where a contract does not clearly define when service by email will be effective, the electronic transactions legislation may provide the answer. This is discussed further below.
If email is permitted, are there any additional requirements?
A contract will sometimes allow service by email, but set further conditions which must be met in order for that email to be a valid form of service. For example, the contract may require that:
- the notice must be sent to a specific email address(es);
- the notice must also be sent by post (or some other form) within a certain number of days; or
- the sender must request a read receipt.
Where a specific procedure for sending emails is prescribed, as the sender, you should assume that it must be followed.
What if the contract is silent on emails?
This issue is likely to be resolved by electronic transactions legislation, which exists nationally and in each State.
The legislation provides that, as a general rule, a transaction (which includes a contract notice) will not be invalid merely because it took place by means of electronic communication, such as email.
The short point is that where the contract is silent, although there may be exceptions, email will generally be an effective mode of communication for giving contract notices.
Timing of receipt – under the contract
The time of receipt of a notice can sometimes be critical.
If a strict deadline is missed, this can result in a right being forfeited. An obvious example is the lapsing of an option if it is not exercised within a particular timeframe. Another is the barring of a claim if it is not made by the time required by the contract.
Some contracts define when a notice sent by email is deemed to be received.
For example your contract might state that a notice is considered to be received at the time it is sent as recorded by the sender’s system. Alternatively, it might state the receipt is deemed to occur half an hour after sending. Your clause might look something like this:
"An email is deemed to be received 2 hours after the time sent (as recorded on the device from which the sender sent the email), unless the sender receives an automated message that the email has not been delivered."
Where strict timeframes apply, a ‘deemed receipt’ provision may determine the validity of the notice.
If your contract states that a notice sent after (say) 5.00pm is taken to be received on the next business day, that provision will need to be read in conjunction with any ‘deemed receipt’ provision. Together, those provisions may dictate the latest time by when an email is required to be sent.
For more information on time bars and whether they are enforceable, take a look at our blog.
Timing of receipt – under the Act
If the contract is silent on when emails are considered to be received, the legislation provides that:
- if the contract includes an email address for the recipient, then it is received when the message enters the recipient’s mail server;
- if the contract does not include an email address for the recipient, then it is received when it comes to the attention of the recipient.
There are some obvious difficulties that arise out of these rules.
For example, what if the sender receives an out of office reply? Or if the document is too large and is not accepted by the recipient’s server? Or what if the email is caught in the recipient’s ‘junk folder’?
In a recent dispute under the security of payment legislation, the NSW Supreme Court shed some light on these issues. It found that a notice communicated by email is received as soon as it is capable of being retrieved by the recipient. This applies even if the recipient has not actually received it.
In that case, the email entered the recipient’s junk folder and was not discovered until a later date. The Court held that the recipient received the email on the date it entered the junk folder as this was the date that it reached the recipient’s server.
The situation may be considered analogous to the delivery of a (hard copy) letter and placement into a person’s (physical) mailbox. The timing of delivery is the time it is placed into the mailbox – not the time the person actually checks the mailbox to investigate its contents.
What if you receive an ‘out of office’ reply?
The effectiveness of a notice which generates an ‘out of office’ reply will again depend on the circumstances.
In many cases, an ‘out of office’ reply will not be a sufficient basis to challenge service. This will be the case even if the out of office reply stipulates that the email will not be read by the intended recipient.
For example, if the contract expressly requires that emails be sent to a particular address, and that address only, the onus would likely be on the recipient to provide a new address for receiving notices if the original address was not intended to be monitored (whether for a specific period or generally).
Further, just because an ‘out of office’ reply is activated does not mean that the email is incapable of being received. It is obviously not uncommon for people to continue accessing their emails while using the ‘out of office’ function at the same time.
Finally, if out of office replies could be relied upon as a way to effectively challenge service, the recipient who was aware of the proposed communication could activate an out of office reply in an effort to defeat the notice. A Court would likely view that type of conduct dimly, and find ways to ensure the notice is treated as being effective.
Obviously, there can be exceptions. For example, the sender who issues a notice to an address knowing that it will not be seen is not acting without risk. Ultimately, the purpose of a notice is to bring something to the other party’s attention. As a general rule, if you wish to ensure the effectiveness of a notice, you should make every effort to achieve that objective.
If you do choose to rely on email for serving contractual notices, it is important to maintain strict records of emails sent and received. Using delivery and read receipts can also be a simple way to capture evidence of delivery.
Is it worth the risk?
You might have a strict legal right to send notices by email. However, this does not mean that it is wise to rely exclusively on email for all types of communication. There may be some situations where an email alone is sufficient, but there may be other situations where sending the same notice in different ways can be justified.
If you choose to send a notice by email, evidentiary issues can sometimes arise about the precise point in time at which delivery occurred (if at all). This can turn on when specific electronic signals ‘entered the recipient’s server’ or ‘came to the recipient’s attention’.
There is still a great deal of uncertainty in this area and new challenges arise as new technology is developed. Indeed, the law sometimes struggles to keep up. For example, one question troubling lawyers is whether ‘deeds’ (as opposed to ‘agreements’) can be entered into electronically, such as through platforms like DocuSign. This particular question can have critical consequences, because the exact same obligation might be enforceable if it is contained in a deed, but not in an agreement.
Interestingly, the NSW Supreme Court has recently rejected service of documents by USB key as a valid form of service for the purposes of the security of payment legislation. The case illustrates the legal difficulties that can arise when the parties use different methods to traditional writing.