Requirement Contracts and The 'Stated Estimate

As of this post, we have seen the basic rule of Section 2-204(3) in operation multiple times within the text of the Code. By way of review, that section states:

Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

In the previous post we looked at the absence of a price term in a contract, and saw that per Section 2-305, the parties can create an enforceable contract without a price in place.   That, like the general rule of Section 2-204(3), requires the intent of the parties to enter into such an agreement.

            We now look at a situation in which no specific quantity need be stated in order to have an enforceable contract.  In this instance, the quantity term is supplied by the ‘requirements of the buyer’ or ‘the output of the seller’.  This situation is governed by Section 2-306(1):

(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.

Although the good faith requirement for output and requirements contracts is mandated by Section 1-304, Section 2-306(1) explicitly states the good faith requirement in output and requirements contracts. 

            The good faith component has parameters placed upon it, in that no output or requirement may ‘be unreasonably disproportionate to any stated estimate’.  In the absence of any stated estimate, no output or requirement may be tendered or demanded which is not ‘normal or otherwise comparable prior output or requirements’. 

It is clear from the text that if no quantity is stated the seller’s output would be comprised of all units produced by the seller.  Similarly, if no specific amount of requirements are stated, the buyer would be able to request all units to fulfill its needs.  Both of course are subject to the limiting language of ‘normal or otherwise comparable output or requirements’, and the good faith requirement of ‘honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade’.

            A question appears to have arisen as to what happens when the buyer provides a stated estimate and then chooses not to purchase any units. Does the seller have any rights in that situation?  A reading of the text of Section 2-306(1) would appear to allow the seller to tender units to the buyer as long as the amount tendered was not ‘unreasonably disproportionate’ to the stated estimate.  That however is not the result reached in a 7^th Circuit case that posed this precise question.

            Empire Gas Corp. v American Bakeries Co. 840 F.2d 1333 (7^th Cir., 1988)  Empire Gas was a retail distributor of propane, and a provider of conversion units which convert gas engines to propane engines.  The major source of profit for Empire was in the contract to purchase propane from Empire which accompanied the sale of the conversion units  During the contract period in question, gasoline prices had risen dramatically resulting in American Bakeries’ decision to convert to propane and its resulting contract with Empire. The first contract drafted by Empire was rejected by American, but the subsequent contract was accepted and executed, which required American to purchase “ approximately three thousand (3,000) [conversion] units, more or less depending upon requirements of Buyer”.

            In discussing Section 2-306, the court posed the question of whether or not a buyer who makes a ‘stated estimate’ of its anticipated needs is actually bound by that estimate as stated in the contract when a buyer decides to purchase no units, or whether that estimate, embodied in a signed writing, is irrelevant and unenforceable.  Judge Posner stated the question as follows:

So we must decide whether the proviso should be read literally when the buyer is demanding less rather than more than the stated estimate.

The court discussed the applicability of the ‘stated estimate’ language to a buyer who orders more than a stated estimate. The court reasoned that without the limiting language, a buyer could order significantly more goods when the market was favorable. In discussing the issue, the court noted that the statute and Official Comment 3’ points to symmetrical treatment of the overdemanding and underdemanding cases.’

            Despite the clear language of the statute and comment 3, the Court concluded that the stated estimate of the buyer was of no legal significance when the buyer chose to purchase no units. In reaching its conclusion, the court noted case law and respected commentary which stands for the proposition that a buyer can reduce its requirements to zero as long as it does so in good faith.  Such a reading is consistent with the statute when a buyer has agreed to buy all of its requirements from a particular seller.  Clearly, if it turns out that there are no requirements, and that this is the result of a good faith decision by the buyer, there is no breach.

             I do not however, agree with the conclusion that a stated estimate by a buyer is of no legal significance when the buyer does not purchase any goods under the requirements contract.  First, and foremost, such a result is in conflict with the clear language of the statute.  It is clear from the statute that a seller in such a situation has the right to tender a quantity as long as the quantity is not ‘unreasonably disproportionate to any stated estimate’. 

            The purpose of the ‘stated estimate’ is easy to grasp.  It allows a seller of goods to make preparations for the buyer while being able to fulfill other orders.  If, as in Empire Gas, seller knows that its buyer is committed to purchasing a certain number of units, it can procure materials to accommodate that order.  Additional production may also be required.  The stated estimate allows the seller to prepare.  I emphasize that the buyer can avoid this result by contracting for ‘all requirements’, rather than a stated estimate. 

            As Judge Posner notes, the comments clearly indicate the drafters’ intent that the "the agreed estimate is to be regarded as a center around which the parties intend the variation to occur."  A fair read of that language leads to the conclusion that the drafters considered the ‘stated estimate’ to have legal significance.  Moreover, there is nothing in the text or the comments which supports limiting the applicability to over purchases by a buyer as opposed to no purchases by the buyer.

            I emphasize again that the case involving the ‘stated estimate’ is different than a pure requirements contract.  If a contract is for ‘all requirements’ of a buyer, and if the buyer in good faith has no requirements, the buyer is not liable. On the other hand when, as in this case, the parties negotiated a contract with a stated estimate of requirements under that contract, I believe that the buyer is bound by that estimate within the variations permitted by the Code.  The buyer could easily have limited exposure by simply contracting for ‘all requirements’.

            Finally, of great significance is the recognition throughout the Code of freedom of contract as an affirmative principle of the Code as embodied in Section 1-302(a).  Moreover, recognizing the agreement of the parties is an underlying principle upon which the Code was drafted per Section 1-103(a)(2).  The parties in Empire agreed that American Bakeries would purchase approximately 3,000 units.  This term was negotiated by both parties.  It is my opinion that the ‘stated estimate’, agreed to by the parties, has legal significance and is binding.

A Case for Setting Standards

            In our discussion of Article 1, it was noted that the Uniform Commercial Code embodies freedom of contract as an underlying principle.  Section 1-302 is a codification of this basic principle. Section 1-302(1a) states as follows:

(a)  Except as otherwise provided in subsection (b) or elsewhere in [the Uniform Commercial Code], the effect of provisions of [the Uniform Commercial Code] may be varied by agreement.

The limits of the abilities of the parties regarding freedom of contract, as well as some of the specific freedoms granted are noted in section 1-302(b)

(b) The obligations of good faith, diligence, reasonableness, and care prescribed by [the Uniform Commercial Code] may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable.

            It is my belief that parties should set standards for good faith, diligence, reasonableness and care whenever contracts are being drafted. Setting these standards removes the question from the jury or the court as to the actual legal question and restricts inquiry to the question of whether or not the fact standards set by the parties have been met and whether or not the standards set are manifestly unreasonable.  An excellent example of the importance of setting standards can be found under Article 7 in connection with the storage of goods.

Section 7-204 deals with the duties of a warehouse to exercise care with respect to goods it has stored.  Subsection (a) to Section 7-204 states as follows:

A warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. However, unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.

It is seen that the warehouse must exercise the level of care which a ‘reasonably careful person’ would exercise under similar circumstances.  This of course, is a standard and used frequently in many areas of law. 

            What is or is not consistent with the standard enunciated however, can be dramatically different than what one might reasonably believe would meet that standard.  This is illustrated in United States Borax and Chemical Company v. Blackhawk Warehousing and Leasing Company 586 S.W. 2d 248 (Ark. CA, 1979). Borax involved the storage of goods consisting of agricultural chemicals owned by U.S. Borax pursuant to a warehousing agreement between the parties. In early 1977 goods belonging to Borax were stolen from Blackhawk. The goods in question consisted of 288 five gallon cans of a product known as Cobex.  The court described the burglary as follows:

The burglars entered the building by ripping open one of the side panels. Then chemicals which had been stored next to the wall were pulled outside to allow entry into the building. After entry a padlock and chain were cut to allow a door to be opened. A forklift truck was "hot wired" since it was locked. Then it was used by burglars to move a sailboat blocking the path to appellant's stored chemicals. Other chemicals in the way were shoved aside, and the cans of appellant's stored chemicals were taken from the premises. The loss sustained by the plaintiff amounted to $23,658.28 and suit was brought for that amount.  at 833-834

Defendant was granted a directed verdict by the trial court, and Borax appealed, stating that defendant was negligent in not providing the following specific security measures:

(a) In failing to provide watchmen inside the facility;

(b) In failing to have any burglar alarms or similar systems installed in the warehouse;

(c) In failing to provide roving patrols outside of the building;

(d) In failing to place palletized storage directly against the inside wall at the point of access as was done against other walls to prohibit any attempt to enter from the outside;

(e) In failing to provide other adequate security measures which would have prevented the break-in and subsequent loss to the plaintiff;

(f) In failing to be put on notice that extra security measures were needed after a previous break-in occurred at the warehouse approximately 7 months before the loss was sustained by the plaintiff. at 836

            The court discussed the security procedures in effect in the context of general negligence standards.  In quoting Arkansas case law, the court states the question as follows:

The failure to do something which a person of ordinary prudence would do under the circumstances, or the doing of something that a person of ordinary prudence would not do under the circumstances.  at 836-837

The court  reversed the trial court’s decision concluding that the question of reasonable care should have gone to the jury. 

            As a result of the agreement between the parties, the determination of reasonable care was placed in the hands of the court.  This worked out favorably for Borax, but the warehouse could have avoided the whole problem by simply stating the security measures being taken; selecting standards which are not ‘manifestly unreasonable; and then proving that those standards were met.  I am not an expert in warehouse security procedures, but it is clear that the burglary in question required considerable effort to succeed.  It may be that the suggestions made by Borax have merit, but it may also be that Blackhawk had adequate security in place.  If Blackhawk had properly drafted the warehouse receipt, the problem could have been avoided.

            The same rationale applies to every written contract.  Parties who set the standards of conduct to govern their transaction eliminate the problems which Blackhawk Leasing had to deal with in the Borax case.  In presenting this approach to the other party, it should be emphasized that everyone benefits from the certainty of setting standards.

Documents of Title: Shipment Under Reservation

The sale of goods often involves the commercial movement of goods by carrier and sometimes the subsequent storage of those goods.  Article 7 of the UCC- Documents of Title- governs the shipment of storage of goods under the Uniform Commercial Code.  At the outset, it must be pointed out that shipments of interstate transactions are governed by the Federal Bill of Lading Act 49 U.S.C.801 et. seq., and the storage of agricultural commodities may be governed by the United States Warehouse Act 7 U.S.C. 241.

A major distinction between these two acts is that the FBLA is a mandatory act, governing shipments in interstate commerce, while the USWA is a voluntary licensing statute in which a warehouse can apply for approval by the Secretary of Agriculture. 

The purpose of the posts relating to the movement and storage of goods will be confined the Uniform Commercial Code; however, given the statistic provided by the Farm Bureau Agency that 47% of all warehouse space in the United States falls within its purview, anyone involved in matters involving the storage of commodities should definitely investigate the applicability of the USWA to a particular transaction.  With respect to other goods which may be stored, Article 7 will control.

The following is an excerpt from The Uniform Commercial Code Made Easy and is designed as a general introduction to bills of lading including the delivery of goods under a bill of lading.  Special emphasis is given to the concept of a ‘shipment under reservation’ which is governed by Section 2-505.

V.    DELIVERY OF GOODS

(A)  Bill of Lading

(B)  Person Entitled to Take Possession of Goods;

          Person Entitled Under the Document.

(A) Bill of Lading[1]

When the carrier receives the boats it will issue  a document known as a bill of lading.   This document will acknowledge the carrier’s possession of the boats, and in addition will contain a contract for delivery of the boats. In such a situation, the carrier is called a bailee.[2] The person from whom the carrier receives the goods is called the consignor,[3] here, Royal. Since the contract calls for delivery to the order of Royal, Royal would also be the consignee.[4]

                                                 Form of Document of Title

A document of title can take one of two forms. It can be negotiable or non negotiable. Section 7-104 specifies when a document is negotiable or non-negotiable:

• (a)  Except as otherwise provided in subsection (c) a  document of title is negotiable if by its terms the goods are to be delivered to bearer or to the order of a named person;

(b)  A document of title other than one described in subsection (a) is non-negotiable.

(c)  A document of title is non-negotiable if, at the time it is issued, the document has a conspicuous legend, however expressed, that it is non-negotiable.

In the instant situation, the goods are to be delivered to the order of a named person, Royal. Thus, the form of the bill of lading falls squarely within Section 7-104(a). As is obvious from the quoted definition, whether or not a bill of lading [or any document of title] is negotiable or non-negotiable is simply a matter of form. To the extent that the bill of lading does not have the proper form, it is non-negotiable.[5] The distinction between negotiable and non-negotiable documents pervades all of Article 7. In fact, the last sentence to the first paragraph of the comments to Section 7-104 states as follows:

The distinction between negotiable and non-negotiable documents in this section makes the most important sub-classification employed in this article....

There are many reasons under Article 7 as to why this is so; it is, however, beyond the scope of this memorandum to discuss all of these. In the instant situation, the question for our purposes is: how does procurement of a negotiable bill of lading to the order of Royal reserve a security interest in Royal?  That is, how does Royal’s procurement of a negotiable bill of lading to its order secure payment or performance of an obligation, per Section 1-201(b)(35). The simple straightforward answer is that the carrier would be required to deliver the boats only to Royal, inasmuch as Royal would be the holder of the negotiable document (bill of lading),  and delivery to anyone else would be unlawful. Again, some further analysis is required to illustrate how this works under Article 7.

(B) Person Entitled to Possession of the Goods; Person Entitled under the Document

The first relevant section in dealing with this question is Section 7-403(a) which reads in pertinent part as follows:

The bailee shall deliver the goods to a person entitled under the document of title if the person complies with subsections (b) [dealing with bailee’s lien] and (c) [surrender or notation of deliveries on document of title]....

As previously noted, the bailee in the instant situation would be the carrier, who, per Section 7-403(a) noted above, must deliver to a “person entitled under a document,” which is defined under Section 7-102(a)(9) ) as follows:

Person entitled under the document means the holder, in the case of a negotiable document of title, or the person to which delivery of the goods is to be made by the terms of, or pursuant to written instructions in a record under, a nonnegotiable document of title.

As indicated, since a negotiable bill would be used here, the “person entitled under the document” would be the holder of that document. Holder is defined under Section 1-201(b)(21)(B) as ‘the person in possession of a negotiable tangible document of title if the goods are deliverable to bearer or to the order of the person in possession’. Thus, as long as Royal maintains possession of the negotiable document of title issued to its order, Royal is the person entitled under the document as the holder of the negotiable document. Should the carrier deliver to anyone other than the holder, it would be an improper delivery for which the carrier would be liable.  The carrier knows this and will only deliver to Royal or the subsequent holder of the document. Royal doesn’t want the boats; it simply wants to maintain possession of the bill of lading until it gets paid.

The next series of posts will roughly track the statutory provisions discussed in the memorandum above as it relates to bills of lading.  Warehouse receipts will be covered thereafter.  

 

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          [1] “Bill of Lading” means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods.... Section 1-201(b)(6).

A bill of lading is a document of title under Section 1-201(b)(16). That section states as follows:

“Document of title” includes dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person or possession of it is entitled to receive, hold and dispose of the document and the goods it covers. To be a document of title a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass.

The use of documents in commercial transactions is extremely important and will be discussed in some detail in this book. For now it should simply be borne in mind that in many situations the document is treated as the equivalent of the goods it covers and that transfer of the document or rights thereunder will generally be equivalent to a transfer of the goods so covered.

[2] “Bailee” means the person who by … bill of lading or other document of title acknowledges possession of goods and contracts to deliver them. Section 7-102(a)(1).

[3] “Consignor” means the person named in a bill as the person from whom the goods have been received for shipment. Section 7-102(a)(4).

[4] “Consignee” means the person named in a bill to whom or to whose order the bill promises delivery. Section 7-102(a)(3).

[5] Section 7-104(c) previously quoted, states as follows:

(c) A document of title is nonnegotiable if, at the time it is issued, the document has a conspicuous legend, however expressed, that it is nonnegotiable.

This provision is contained in the newest amendments to Article 7 and is absent under Section 7-104. The amendment is logical insofar as it indicates a clear intent of the issuer, and presumably the consignor, that the document be treated as nonnegotiable. The importance of negotiability will be seen shortly in Doug’s memorandum.

Section 2-607(5)(a): Attorneys’ Fees as Consequential Damages

As noted in previous posts, the designation of a party as a merchant activates a number of special provisions under Article 2.  Among the most important is the warranty of merchantability under Section 2-314.  Subsection (1) to Section 2-314 states as follows:

Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in the contract for their sale if the seller is a merchant with respect to goods of that kind.  Section 2-341(1)

What is or is not merchantable is set forth in Section 2-314(2):

            Goods to be merchantable must be at least such as

(a) pass without objection in the trade under the contract description; and

(b) in the case of fungible goods, are of fair average quality within the description;     and

(c) are fit for the ordinary purposes for which such goods are used; and

(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(e) are adequately contained, packaged, and labeled as the agreement may require; and

(f) conform to the promise or affirmations of fact made on the container or label if any.

Sales of goods often involve several levels of distribution.  Initially, the sale of raw materials to be used in the manufacture of finished goods; sales from the wholesale to the retail level, and the sale to the retail customer. The warranty of  merchantability will be given at each stage provided the seller is a merchant.  Most of the time, the goods will meet the requisite standard of merchantability; sometimes they will not.  Very often this will occur in a situation involving a middleman who purchases goods for resale.  When the goods sold are not merchantable, and the middleman is sued for breach of warranty, specific rules kick in which the middleman should be aware of if he or she is to minimize exposure. 

Section 2-607(5)(a) contains rules of particular significance when goods are resold by a middleman to a third party.  That section states as follows:

Section 2-607(5)(a) states as follows:

Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over

(a)  he may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound.

This section enables the middleman who is being sued for the allegedly defective product to put his seller on notice of the litigation and provide him with the opportunity to defend against the litigation.  The failure of the original seller to do so will result in his being ‘bound in any action against him by his buyer by any determination of fact common to the two litigations.’

            As has been stated throughout these posts, it is highly recommended that the actual language of the statute be tracked in this type of situation.  ‘Coming close’ can result in litigation costs that could have been avoided.  In this regard however, and in connection with Section 2-607(5)(a), it must be noted that this section is permissive in nature, and that if a party does not strictly comply with Section 2-607(5)(a), she or he may still maintain a cause of action against her/his buyer for the breach of warranty.

This follows from the language of Section 2-607(5)(a) which states that the buyer ‘may give his seller written notice of the litigation.’  It is clearly permissive.  This question was thoroughly discussed by the Michigan Court of Appeals in Old Kent Bank v Kal Kustom Enterprises, which has impact in all states by reason of the uniformity provision of Section 1-103(1)(b).  See e.g. of In re Hispanic American Television Co., Inc., 113 B.R. 453 (Bankr.N.D.Ill.1990). 

The court in Old Kent discussed the permissive nature of Section 2-607(5)(a) as follows:

The language of M.C.L. § 440.2607(5)(a) is clear and unambiguous.   The statute's plain language reflects its discretionary nature.   Again, the statute states that where a buyer is sued for breach of warranty or other obligation for which his seller is liable, he “may give his seller written notice of the litigation.”

The court went on to state:

Further emphasizing the permissive nature of subsection 2607(5)(a) is the fact that a review of other subsections set forth in M.C.L. § 440.2607(5) indicates that the Legislature intentionally made some portions of the statute mandatory, and others permissive.   Subsections 2607(3)(a) and 2607(3)(b) contain the mandatory “must” in terms of notice.⁵  If the Legislature intended subsection 2607(5)(a) to be mandatory, it would have used similar mandatory language.

            I have been involved in cases where the original seller refuses to come into defend and in some situations completely ignores the notice sent.  This leaves the middleman in a very bad situation, for the original seller is the party best equipped to defend the product he sold.  As a result of this reality, at least one court has awarded attorney’s fees to the middleman who gave proper notice.  The starting point for this analysis is Section 2-714, which deals with buyer’s damages for accepted goods where seller has breached.  That section states as follows:

(1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable.

(2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.

(3)In a proper case any incidental and consequential damages under the next section may also be recovered.

As noted in Section 2-714(3), in a ‘proper case’ incidental and consequential damages may be recovered under Section 2-715:

(2) Consequential damages resulting from the seller's breach include

(a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and

(b) injury to person or property proximately resulting from any breach of warranty.  

            In addressing the question of attorney’s fees, it must be noted that the attorney’s fees recoverable under Section 2-715(2)(a) are of a different nature than those claimed in a traditional contract litigation.  Attorney’s fees incurred in connection with a litigation in which a non breaching party is, in effect, forced to defend a claim from his buyer for defective goods sold by the original seller, are of a whole different nature.

            The precise issue was discussed by the United States District Court Acushnet Co. v. G.I. Joe’s, Inc., 2006 WL 2729555 (D. Or. Sept. 22, 2006). The case involved a breach of infringement warranty governed by Section 2-312(3) of the UCC.  Acushnet is the sole manufacturer of Titleist golf balls.  G.I. Joe’s purchased what it thought were Titleist balls from Cam Golf. They were in fact fakes.  Acushnet investigated further and learned that other fake Titleist balls were being sold by G.I. Joe’s elsewhere.

            Acushnet sued G.I. Joe’s, who in turn joined Cam Golf, Inc., the latter for breach of the warranty of infringement.  Acushnet and G.I. Joe’s settled with G.I. Joe’s paying $25,000 and incurring $19,300 in attorney’s fees. G.I. Joe sought recovery of both amounts in its action against Cam Golf.   The latter argued that attorneys’ fees were not recoverable, citing supposed authority for that proposition.  G.I. Joe responded:

G.I. Joe’s contends that Cam Golf has confused the issue of recovering attorney’s fees in prosecuting a lawsuit against the seller of goods with attorney’s fees incurred in defending a claim brought against the buyer by a third party. [at page 5]

 In addressing the matter, the court noted the permissive nature of Section 2-607(5)(a) and concluded that attorney’s fees were recoverable under Section 2-715(2)(a),  the Court quoted from Raymond v. Feldman 124 Ore. App 543, 546 (1993) as follows:

The general rule is that attorney’s fees are not recoverable in a breach of contract action unless authorized by statute or the agreement.  However  an exception to the general rule is when a party’s breach of contract involves the non breaching party in litigation with a third party  In such a case the non breaching party may be entitled to recover its litigation costs resulting from the separate action. [at page 6; Emphasis the Court’s]

These consequential damages are recoverable under the language of Section 2-715(2)(a), and the general policy of Section 1-305 which seeks to make non breaching parties whole, and has a special exception for awarding attorney’s fees when permitted under ‘other applicable rules of law’. The rule allowing attorney’s fees in defense of third party products is one of those exceptions. 

I suggest that parties who may be involved in situations in which Section 2-607(5)(a) create a document tracking the language of that section so that effective notice can be given in any situation in which it is required.