Written Notice Requirements for Termination Under a Texas Contract

Terminating a Texas Contract with Written Notice

A well-drafted contract includes language to provide for the consequences of almost any possibility. One of the many things such a contract provides for is the possibility of termination before all the obligations under the contract are met. Should one of the parties wish to terminate a contract early or officially notify another party of an alleged breach of the contract, the other party or parties usually require a written notice. A recent Texas Supreme Court decision clarified some gray areas about complying with written notice requirements.

“Substantial Compliance” and Written Notice

Prior to James Constr. Grp. v. Westlake Chem. Corp., the Texas Supreme Court had not made a specific decision about what standard of compliance would satisfy a contractual requirement for written notice. Referencing other decisions with similar circumstances, the Court held that the correct standard would be “substantial compliance.” This is to say that “a party’s minor deviations from a contractual notice condition that do not severely impair the purpose underlying that condition and cause no prejudice do not and should not deprive that party of the benefit of its bargain.” James Constr. Grp. v. Westlake Chem. Corp., No. 20-0079 (Tex. May. 20, 2022).

What does this language mean? Well, we can review some examples given by the court. In a custody order, for example, two parents agreed that should either parent take their child on an international trip, that parent would have to give written notice to the other parent. The notice needed to contain various details about the trip, so that the parent receiving the notice would be able to sign consent forms. The father refused to sign the consent form when the details in the notice he received from the mother met most, but not all, the notice requirements under the custody order. Nevertheless, a court found that the notice contained “bulk of the requisite information,” and that small errors in the notice did not mean it did not fulfill the notice requirement.

In another example, a contract required written notice via registered to cancel a contract. One party sought to cancel the contract with written notice but without using registered mail. The other party did actually receive the written notice even though another method had been used in sending the notice. There again, a court held that the sender of the notice had “substantially complied” with the contract in sending written notice.

As the Court lays out in this decision, one of the reasons for applying this doctrine is to prevent parties from using “gotcha” tactics and refusing to perform their contractual obligations just because the other party may have made small and innocuous errors in following the terms of an agreement.

Written Notice Must Actually Be in Writing

The Court went on to clarify that, despite the relatively lax compliance standard of “substantial compliance,” if a contract states that written notice must be provided, the notice does in fact have to be in writing.

In James Constr. Grp. v. Westlake Chem. Corp., a contract provided that parties must provide written notice regarding a number of issues should they arise. In one instance, the parties held a meeting in which one party communicated its intent to terminate the contract. However, that party did not provide actual written notice, nor was there any other written record of the actions taken at the meeting. As a result, the Texas Supreme Court held that even though one party may have been able to prove that the other party had actual notice or knowledge that they were terminating the contract, the notice still did not “substantially comply” with the contract. James Constr. Grp. v. Westlake Chem. Corp., No. 20-0079 (Tex. May. 20, 2022).

Based on a number of precedents, the Court reasoned that a written notice requirement under a contract needs to be in written form at the very least. A notice may lack a number of other requirements and still be considered “substantially compliant,” but a notice that fails to comply with a requirement that it is in written form does not meet the standard of being “substantially complaint.” The entire point of written notice requirements is to relieve parties to a contract of the obligation to prove that other parties have actual knowledge of the notice. Proof of actual knowledge is, after all, harder to demonstrate than proof that written notice has been provided and received.

This is one of many examples demonstrating the importance of working with capable attorneys to draft and interpret contracts. Someone who is not well-versed with contract law may be unable to determine which actions do or do not satisfy contractual requirements.

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