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ABA Section of Business Law
Business Law Today
September/October 1998
Legal-ease
Does the Pony Express Still Stop Here?
By Howard Darmstadter
Here's a standard contract provision (from a big New York firm, tidied up somewhat): All notices shall be in
writing (including telecopier, telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed
or delivered to the relevant party at its address on schedule 1. Notices shall, when mailed, telecopied,
telegraphed or telexed, be effective when deposited in the mails, telecopied, delivered to the telegraph
company or confirmed by telex answerback, respectively. Standard it may be, but does it make sense? In
particular, why should a notice be effective when it's sent rather than when it's received?
Sometimes a notice has to be effective on sending. Section 222 of Delaware's General Corporation Law, for
example, provides that notice of a stockholders' meeting must be given not less than 10 nor more than 60
days in advance, and that the notice is given "when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the corporation." With multiple
stockholders, only the sending of the notice can provide a single reference point. Moreover, it may be
unimportant if a small minority of stockholders fail to receive the notice.
The contract provision quoted above is worded much like the Delaware stockholders' notice provision, but it's
application to a contract seems forced. The purpose of a notice is only achieved when the addressee reads it.
Clearly, it is the sender of the notice who is best placed to make sure the notice arrives.
In negotiations, lawyers occasionally insist on this provision because they think their clients are more likely to
be senders than recipients. The provision, they feel, will make a notice effective even if it never arrives; their
clients can just fire and forget. Perhaps, but I would never place that much faith in the provision - is it a
notice, after all, if it fails to notify?
Under the Uniform Commercial Code (� 1-201), you notify someone if you take "such steps as may be
reasonably required to inform the other in ordinary course whether or not such other actually comes to know of
it." Notice delivered to an organization is "effective for a particular transaction from the time when it is brought
to the attention of the individual conducting that transaction, and in any event from the time when it would
have been brought to his attention if the organization had exercised due diligence..." These provisions can be
varied by agreement (� 1-102(3)), but they provide a baseline for the approach a court might take when
Freddie claims he never got the notice.
I prefer to regard the effective-on-sending provision, like the Delaware stockholders' notice provision, as
primarily concerned with timing: Assuming that the notice gets to its destination, it is the sending, not the
receiving, that starts the clock ticking.
Somewhere beyond the mists of time, a primordial lawyer hunkered down to chisel the first notice provision.
Why did he choose to make notices effective on sending rather than receipt?
I suspect that our legal primitive began with an assumption about the method that would be used to send the
notice and then worked back from the characteristics of the method to decide whether effectiveness on sending
or receipt made more sense.
If that first notice provision was written any time before about 1960, our ur-lawyer (call him Urnie) probably
assumed that notices would be mailed. Mail was cheap and left a written and signed record.
Urnie might have reasoned thus: If a notice is sent by first-class mail, it is difficult to fix the time of receipt.
But there is an objective indicator of the time first-class mail is sent - the postmark. If I receive the notice, I
know from the postmark when it was mailed and have the envelope as evidence; if I sent the notice, I know
when it was mailed and can challenge the recipient to produce the postmarked envelope.
Urnie's reliance on the postmark may seem unrealistic, but he was probably making one more reasonable
assumption: that anything mailed first-class would almost certainly be delivered the following day.
It is hard for us cynical moderns to realize the awe with which a more innocent time regarded the United
States Post Office. My mother would recite with no trace of irony that "neither snow, nor rain nor something
something can stay these couriers from the swift completion of their appointed rounds."
Two random examples may illustrate the faith our elders had in their mail service: Berton Roueché in The
Medical Detectives reports that in 1942 a doctor at New York's Metropolitan Hospital had to inform the
Department of Health: ... to which the appearance of any disease of an epidemiological nature must be
promptly communicated, that he had just uncovered a case of trichinosis.....The report of the arresting
discovery at Metropolitan reached the Health Department on the morning of Friday, April 17 [the day after it
was sent]. Its form was conventional - a postcard bearing a scribbled name, address and diagnosis. Example
2: In the 1960s, The New Yorker's profile of the jeweler, Harry Winston, revealed that Winston's standard
method for shipping diamonds was to mail them. He claimed he never lost a stone.
Besides its touching faith in the reliability of the mails, the quoted notice provision bears other marks of its
ancient provenance. I refer, of course, to the references to telex and telegraph. Today's preferred means for
notices and other time-sensitive communications are fax (which makes its way into the quoted notice provision
by a reference, no doubt added recently, to "telecopier") and air courier (which may qualify under the provision
as "mail"). I suppose we shall soon be giving notices by e-mail, a method not contemplated by the quoted
notice provision.
Because the quoted provision specifies transmission means (mail, telecopy, telex, etc.) rather than transmission
results (confrontation with addressee eyeball), it does not adapt well to new technologies. A more flexible
notice provision might be achieved by requiring the notice to be a "record," as defined in recent drafts of
articles 2B and 9 of the Uniform Commercial Code: "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is retrievable in perceivable form. I didn't ride
all this way, however, just to present a better notice provision. In any scheme of things, notice provisions
aren't that important. What I hope to deliver is an object lesson.
Urnie the atturney's notice provision was, for its time and place, a solid piece of drafting. But Urnie retired to
the Sun Belt many years ago. The technologies that are familiar to us were unknown in Urnie's heyday, and we
now have much less faith in the institution - the U.S. Post Office - on which he relied.
Like Urnie, we shall always draft provisions based on the world we know. We can draft flexibly, and we can
provide some leeway for technical and social change, but we are likely to be wrong in much of our thinking
about the future.
Legal boilerplate is neither mumbo-jumbo nor holy writ. It represents, for the most part, a draftsman's
reasonable attempt to deal with features of a legal, business, social and technological environment. As that
environment changes, well-drafted provisions can become unsuitable. Unfortunately, the ancient provisions
don't come with commentary. An associate plodding through the firm's form file is unlikely to know what
assumptions underlay the provisions. Perhaps an obscure phrase is there to deal with a legal problem that
remains formidable. This possibility renders many lawyers reluctant to tamper with the hallowed hokum. But
the obscure provision may just as likely have been written to deal with bustles or buggy whips.
The conclusion is depressing: safety does not lie in reciting the standard phrases. Perhaps the provisions were
drafted by geniuses, but those geniuses may have been wearing powdered wigs.
It would be nice if a committee existed (I am not volunteering) that published revised boilerplate provisions on
a continuing basis, with commentary to explain why certain choices were made. Until then, the only solution is
to think clearly and act bravely. Courage, mes petits!
You can e-mail Darmstadter at [email protected].
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