Serving notice to terminate a contract in Russia

Out-Law Guide | 23 Mar 2022 | 6:37 pm | 5 min. read

Russia’s invasion of Ukraine has prompted many firms to try to extricate themselves from their business operations and commercial relationships with counterparties based in Russia.

Often, this will involve serving notice on a Russia-based counterparty to terminate the contract. However, there are a number of legal and practical issues to consider when serving a notice to terminate a contract – a process made logistically more difficult when counterparties are based abroad.

If a court found that a party’s service of notice was not valid, their counterparty could potentially claim for damages – for example, for loss of future profits or the costs of finding new suppliers. Any dispute over whether a party had properly effected service of the notice could lead to a lengthy court battle and substantial legal costs, as well as the risk of ineffective service for the terminating party.

This guide will help you to navigate those legal, practical and logistical issues to try and ensure that you properly effect service.

The right contract

Giving notice to terminate a contract is governed by the notice provisions of the contract itself. A proper analysis of the contract, and any contractual matrix which applies, needs to be the starting point.

Although this may sound like an obvious point, make sure that you’re relying on the right notice provisions. For example, where two parties have various contracts relating to different aspects of their commercial operations it can be common to have a master agreement between them. If the master agreement and the other contracts have been drafted consistently then there should also be consistency between the notice provisions.

One issue which can arise is deciding which notice provisions apply if there is inconsistency or conflict between the master agreement and other ‘sub’ agreements. In these circumstances, you would have to look at the detail of each contract to see which notice provision, if any, had priority. If in doubt, adopt a cautious approach and follow the termination provisions in both contracts to ensure that one way or another they are complied with.

Interpretation

A well-drafted notice clause should set out all the specific requirements for termination – for example the form of the notice; where and how it needs to be served; and when service takes effect. If there are any ambiguities in the notice provisions, these will be interpreted in accordance with the laws which are applicable to that contract. For example, if there is an England and Wales (E&W) choice of law and jurisdiction clause then the E&W courts will interpret any unclear or ambiguous clauses from an objective perspective.

A proper analysis of the contract, and any contractual matrix which applies, needs to be the starting point

Most notice clauses will include a requirement that the notice should be “in writing”, which creates a degree of formality and prevents the evidential issues which can then arise when a notice is given orally. What is meant by “in writing” is open to interpretation, and will often be dealt with by a clear definition of “in writing” in the contract. The E&W courts have adopted a wide definition of “in writing”, and held for most purposes that this includes email. Consideration also needs to be given to any other formal requirements, such as whether the notice needs to be on letterheaded paper or whether it needs to be signed. The courts will expect strict compliance with these provisions where they exist.

Serving the notice

Once you have gone through the formality of making sure the notice is in the correct format, you should consider where and how the notice is actually served. There will normally be several methods specified in the contract such as by email to a specific email address, fax to a specific fax number or personal or recorded delivery at an address. This address could be a place of business, a registered office, or the address of an agent such as a solicitor. The notice should often be marked for the attention of a specific individual.

One complication can arise if the contract provides for service at a specific address (such as the registered office) but you know that the registered office has changed without the notice provisions of the contract being updated. In these circumstances it is often best to adopt a cautious approach and service notice on both the old and new registered office. Not only will you then be complying with the notice provisions of the contract, but you will also giving actual notice at the new registered office address. This can apply to other methods of service, for example if you know that a fax number has changed.

Deemed service of the notice

Normally the notice clause will specify when the notice has been served depending on the method of service. For example, a notice served by hand at a registered office is deemed served at the time the notice is left at the address, or if sent by email at the date of transmission. It is also worth checking to see if there is any restriction on when deemed service can take place, and in particular whether deemed service needs to take place on a business day. Due to the deemed service provisions there is generally no requirement for the recipient to actually read the contents of the notice.

If deemed service would occur outside business hours in the place of receipt, it might be deferred until business hours resume. Practically speaking, this means that if a notice must be served by a particular day, and that day falls on a weekend or bank holiday, it would be necessary to bring forward serving the notice to make sure it fell on a business day prior to the final day for service of the notice. It is normally better to serve inside business hours to ensure proper receipt, rather than risk a notice not being received - and a dispute over service arising - because, say, it has been served on a contracted night security guard at a multi-occupancy premises rather than on the relevant company itself. A proper understanding of the detail of the notice provisions is essential.

When there are no deemed service/receipt provisions in a contract, the sender will generally have to prove receipt by the intended recipient. This can be very difficult, particularly when the counterparty is based overseas, which emphasises the importance of these provisions being covered by the notice clause.

Sometimes a counterparty may take specific steps to try and prevent service. For example, where service by fax is permitted by the contract, a counterparty might deliberately switch off the designated fax machine. In circumstances like this, it might be possible to ask the E&W courts to imply a term into the contract that the counterparty would not try and prevent service, and that the counterparty has been in breach of contract by doing so. However, if service can be effected by alternative means, this should be done.

Safety

Consideration also needs to be given to whether a particular method of service is safe. Personal service at a particular address, for example, might put the party serving the notice at risk if the location of the specific address is in an unsafe area. Serving the notice might also put them at risk of harm or arrest.

In these circumstances a party seeking to give notice may have to look to other methods of service that are either permitted under the contract or, although not specified in the contract, which might still lead to the counterparty being aware of the notice. The E&W courts will normally expect strict compliance with service provisions, but they may make allowance where the serving party has still made reasonable attempts to effect service and the prescribed contractual methods are unavailable.

Russia-Ukraine crisis
Russia's invasion of Ukraine in February 2022 shocked the world and had immediate economic and political consequences. We track and analyse the implications of the situation as it develops.
Russia-Ukraine crisis