In the recent case of Hume Computers Pty Ltd v Exact International VB [1], the Federal Court considered whether notice of termination of a Distributorship Agreement, as given and received by the solicitors for each party and not the parties themselves, was valid.
Background
The Distributorship Agreement ("the Agreement") between Hume and Exact provided for termination without cause by either party at the end of any calendar quarter, upon 90 days' written notice.
In December 2006, the solicitors for Exact wrote to the solicitors for Hume notifying Hume of Exact's intention to terminate the Agreement with effect on and from 31 March 2007. Hume argued that the letter was not a valid notice of termination.
Court Conclusions
Dutch Law
The Agreement was governed by Dutch law. Foreign law is a question of fact which must be proved by a qualified witness. However the burden of proof of foreign law only rests upon a party that asserts that foreign law is different from domestic law; otherwise domestic law applies. Exact did not assert that Dutch law differed from Australian law so was not required to prove that the Agreement was terminated under Dutch law.
Notice of termination as given and received by solicitors
The Agreement did not prevent a party from giving or receiving notice by its agent, as it contained no prescription for the method of service. In such cases, provided the "agent" is authorised, notice can be given by the agent in its own name. The solicitors for Exact were therefore entitled to give the notice of termination on behalf of Exact.
The letter notifying Hume of Exact's intention to terminate was delivered to the offices of Hume's solicitors. In addition, an email was sent to Hume's solicitors with the same letter attached. The letter was later forwarded by Hume's solicitor via email to Hume. The Agreement did not prevent notice by way of indirect delivery to Hume and this was sufficient to amount to effective notice. Hume's solicitors had actual authority to receive the notice on Hume's behalf as a "matter" arising under the Agreement.
The email to Hume attaching the letter was held to constitute effective written notice.
Unequivocal election to terminate
The letter stated that Exact was notifying Hume of "its intention to terminate". Applying a commercially sensible construction, the letter was held to convey clearly and unequivocally that the Agreement was to terminate with effect on and from 31 March 2007.
Lessons to be learned
This case illustrates that if an agreement does not prevent a party from giving notice by its agent, its agents may give and receive notice on their behalf, provided they have the requisite authority.
Importantly:
- Such notices need not disclose the agency; and
- In the absence of a prescription in the agreement, email communication will satisfy the requirement of written notice in light of today's commercial and technological realities.
Therefore, parties who want stricter notice requirements should "spell them out" in the document.
For further information please contact:
Lis Boyce, Partner, Sydney, 61 2 8233 9566, lis.boyce@dibbsbarker.com
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[1] (2007) FCA 478
