Top Tips for Terminating contracts - Don't score an OG

Notices terminating contracts are often a fertile ground for litigation. In a recent decision from the Scottish Appeal Court (Our Generation Ltd v Aberdeen City Council [IH] 23.07.19 (Unreported) - [2019] CSIH 42), Our Generation ("OG") failed to convince the court that an email attaching a statement of account was sufficient so as to operate as a demand notice for payment which in turn was required as a precursor to terminating the contract.

The facts

OG had installed solar panels on a large number of Aberdeen City Council's buildings with a view to the Council then paying for the electricity generated by the panels. The Council were obliged to pay within 20 days of receipt of invoices. The contract also contained termination provisions. These provided that if any party failed to make payment of an amount properly due and such amount remained unpaid at the expiry of 20 Banking days after receipt of a written notice requiring payment, then the contract could be terminated. OG sent an email to the Council on 25^th July 2017 which attached a "statement of balances now overdue to Our Generation Solar". On 24^th August, OG's solicitors wrote to the Council's Head of Legal purporting to terminate the contract because the invoices remained unpaid following receipt by the Council of what OG attempted to characterise as a written notice requiring payment, as sent by email on 25^th July.

The decision

The court had little difficulty in dismissing OG's case for a few reasons including that the terms of the email did not convey the necessary information to the Council that it was a notice under the contract upon which OG intended to rely for the purposes of termination and, also, some clear language was needed around the requirement for payment within 20 Banking Days in the original communication of 25^th July.

Top Tips

It was, perhaps, none too surprising that a draconian outcome for the Council was averted because OG didn't make their intentions clear from the outset in line with the contract. But here are 5 tips to help avoid similar issues if you are issuing notices:

1. Be clear it's a notice e.g. head up the email/letter or fax with express language like "Notice under Clause X".
2. Make sure the correct parties to the contract are identified in the notice - one of the issues for OG was that the email dated 25^th July referred to Our Generation Solar.
3. Narrate and follow relevant contractual language - especially where it provides for serious consequences following failure to remedy within a timescale for compliance.
4. Pay heed to any helpful service provisions in contracts - although OG were not bound to follow one specific mode of delivery, many contracts do provide for recorded delivery or fax service.
5. Check and retain any evidence of successful delivery where possible - if you know that a notice has "bounced" consider carefully if what you have done already constitutes successful service.

Hopefully, following these tips may reduce the risk of disputes but, if it's a really important notice, there are professionals out there that can be instructed to reduce the risk of an OG situation arising.