Notices Clause

What is a notices clause?

Notices Clause (in German: Mitteilungsklausel) is a contractual provision that sets out how declarations under the contract are to be made: in what form, in what language, by what route and to which recipients. It also determines when a declaration is deemed to have been received, that is, to have reached the recipient.

As with an application deadline, what counts is not when a letter was sent but when it reaches the recipient.

The clause belongs, in German contracts usually under the heading “Mitteilungen” (notices), to the final provisions of company purchase agreements, participation agreements, shareholders' agreements and loan agreements. It matters wherever rights are exercised by a declaration within a deadline. Examples are the notification of claims under warranties and withdrawal after the drop-dead date, the agreed latest date for closing. Further examples are the exercise of co-sale rights (tag-along) and obligations to sell alongside others (drag-along), terminations and objections to statements of account.

Receipt under Section 130 of the German Civil Code (BGB)

A declaration of intent is a declaration that is meant to bring about a legal consequence, such as a termination or a withdrawal. Towards an absent person, it takes effect under Section 130(1) BGB at the time it is received by that person. It has been received as soon as it has reached the person's sphere of control, for example the letterbox or the email inbox, in such a way that, under ordinary circumstances, it can be expected to be noticed. A letter dropped into a company's letterbox in the evening is therefore, as a rule, received only on the next business day. For emails in business dealings, the usual business hours accordingly matter.

The sender must prove receipt. Registered mail with personal delivery (Übergabe-Einschreiben) that cannot be delivered is not received merely upon the delivery notice but only upon collection. If the recipient does not collect it although he or she must expect legally significant declarations, the recipient may in certain circumstances be barred by good faith (Treu und Glauben) from relying on the lack of receipt. Reliable methods are handover by a messenger who knows the contents and service by a bailiff (Gerichtsvollzieher), which replaces receipt under Section 132(1) BGB.

The parties may deviate from Section 130 BGB. The notices clause can therefore specify when a declaration is deemed received (deemed receipt). In general terms and conditions, that is, conditions drafted in advance for many contracts, narrower limits apply to such rules.

Form: written form, text form and agreed form

Under Section 126 BGB, statutory written form requires a document signed by hand. It can be replaced by electronic form, that is, by a qualified electronic signature, a digital signature with particular security safeguards (Section 126a BGB). For text form under Section 126b BGB, a legible declaration on a durable medium that names the person making it is sufficient, for example an email.

If it is not the law but only the contract that requires written form (agreed written form), then under Section 127(2) BGB, in case of doubt, transmission by telecommunication is sufficient, for example an email without a handwritten signature. Whether the parties intended this is often disputed. A carefully drafted notices clause therefore states expressly whether an email is sufficient, whether a signed version must be attached as a PDF or whether a letter or courier must follow in addition.

The clause cannot lower statutory formal requirements. Under Section 623 BGB, the termination of an employment relationship requires written form, and electronic form is excluded. For options on GmbH shares (GmbH: German limited liability company), depending on the structure, even the declaration of exercise may require notarial form, that is, certification before a notary.

Content of a notices clause

• Recipients and addresses: name, postal address and email address of each party, where appropriate “for the attention of” a particular person.
• Copies to advisers: whether copies to law firms are required and whether their absence makes the notice ineffective.
• Transmission routes and receipt rules: handover, courier, registered mail or email, each with the time at which the declaration is deemed received.
• Changes of address: effective only after notification to the other parties.
• Recipient representative: where there are many sellers or shareholders, a joint representative to whom declarations are addressed with effect for all.

In brief form, a notices clause can read roughly as follows: “Notices under this agreement require written form, unless the law prescribes a stricter form; transmission by email is sufficient. They are to be addressed to the addresses set out below. Changes of address take effect only upon notification to the other parties.”

Agents for service of process for parties abroad

Where a party has no seat in Germany, it often appoints an agent for service of process in Germany, for example its law firm or a group company. Declarations and, to the extent procedural law allows, court documents can be served on that agent. This avoids formal service abroad, which can take considerable time. The appointment is usually coordinated with the provision on governing law and jurisdiction (Governing Law & Jurisdiction).

Deadlines and how they are calculated

Many deadlines in transaction agreements begin with the receipt of a declaration. This applies to objections to the completion statement under completion accounts, on which the purchase price is adjusted, and to an earn-out calculation, that is, a performance-linked part of the purchase price. It applies equally to acceptance periods where a shareholder must first offer his or her shares to the others (obligation to offer) and to periods for bringing a claim after a warranty notice.

If the contract contains no rule of its own, Sections 187 to 193 BGB apply. The day of receipt is not counted (Section 187(1) BGB), and the period ends at the end of its last day (Section 188(1) BGB). If the end of a period for making a declaration falls on a Saturday, Sunday or public holiday, the next working day takes its place (Section 193 BGB). In cross-border contracts, the clause should also name the relevant time zone.

Practical example: meeting a deadline by email under the notices clause

After the closing of a company acquisition, the buyer sends the seller the draft completion statement. The seller can raise objections within 30 days (calendar days) of receipt; otherwise the draft becomes binding. The notices clause permits email to two named addresses. An email received after 6 pm or on a day that is not a business day (Monday to Friday excluding public holidays) is deemed received on the next business day.

• Receipt of the draft: The buyer sends the email on a Thursday at 7:30 pm. It is deemed received on Friday.
• Start of the period: The day of receipt does not count. The first day of the period is the Saturday.
• Arithmetical end of the period: The 30th day after the Friday of receipt is a Sunday.
• Postponement: Because a declaration is to be made within the period, the following Monday takes the place of the Sunday.
• Consequence of the receipt rule: If the seller sends its objections on Monday at 8:15 pm, they are deemed received only on Tuesday. They are late, and the draft becomes binding. An email before 6 pm would have met the deadline.

The receipt rule decides the outcome in this case. Under Section 130 BGB, the late email would probably also have been received only on Tuesday, but under the clause this is established beyond dispute. Whoever uses up a deadline to the last day bears the risk of every delay; in a dispute over the statement of account, this can change the purchase price by the entire amount in dispute.

Distinctions: notices clause, service and written form clause

• Receipt and service: Receipt concerns the taking effect of declarations under the BGB. Service is the formal transmission of documents, above all in court proceedings under the German Code of Civil Procedure (ZPO).
• Written form clause: sets out the form in which the contract itself can be amended. The notices clause concerns declarations made on the basis of the contract.

Common mistakes

• Outdated addresses. After relocations, name changes or the departure of named persons, notices do not reach the recipient in time if changes were not communicated.
• Email not expressly regulated. Where written form is agreed, it then remains disputed whether an email is sufficient.
• Sent only to advisers. A notice that goes solely to the other side's law firm meets the deadline only if the law firm is authorised to receive it.
• Mandatory form overlooked. An email rule replaces neither statutory written form nor notarial form.
• Deadlines used up to the last hour. Anyone who sends on the last day after the close of business named in the clause risks the declaration being deemed received only on the next business day.

Frequently asked questions

Is an email sufficient if the contract requires written form?

In case of doubt, yes, if written form is only agreed by contract (Section 127(2) BGB). If the law requires written form, an email is not sufficient. An express rule in the notices clause provides clarity.

When is an email received?

As soon as it arrives in the recipient's inbox and, under ordinary circumstances, can be expected to be noticed, that is, in business dealings during the usual business hours. The notices clause can set a different point in time.

Is registered mail the safest route?

Not necessarily. Registered mail with personal delivery is received only upon collection. With registered mail with drop-off (Einwurf-Einschreiben), the delivery record proves the drop-off but not the contents of the envelope. Messengers who know the contents, or service by a bailiff, are safer.

Does a message sent through a messenger service count as a notice?

Only if the clause permits this route. If it lists the permitted routes exhaustively, a messenger-service message is generally not sufficient.

The Roemer Capital view

In transactions, Roemer Capital keeps a deadline list tied to the notices clause: objection periods for completion statements and earn-outs, periods for warranty notices and the date from which withdrawal becomes possible. Before signing, it clarifies with the client's law firm whether the addresses of all parties are current and whether email is expressly regulated as a transmission route.

In financing rounds with many shareholders, Roemer Capital makes sure that a recipient representative is named for the founders or existing shareholders. The declarations themselves are made by the client or its law firm. Roemer Capital ensures that the figures on which they rely are available in good time before the deadline expires.