Is Time Really of the Essence?
Time is of the Essence. Though many have seen these five words in a contract, few actually understand the legal impact of this provision. Simply put, this provision means that if there are dates or deadlines contained in the contract, those dates are of critical importance, and strict compliance with those dates is mandatory. As a result, any delay may be grounds for canceling the contract or obtaining other remedies available in the agreement. A time is of essence provision is often included in contracts where the completion of the obligations is dependent on time or the occurrence of a specific condition or event. Time is of the essence clauses frequently appear in contracts with respect to the sale of perishable goods or the sale of property where the value of said property can fluctuate rapidly. Other contracts which typically contain time is of the essence provisions include: express or rush service contracts, contracts involving performances that are to take place at a specific time and date, and real estate contracts, particularly when market values are fluctuating quickly. You will usually see a time is of the essence provision in a contract in situations where performing the contractual obligation after a certain date or time would render such act or the entire contract useless or diminish its value significantly.
Does this mean that if a time is of the essence clause is not included, the dates will not be mandatory or followed in the contract? Not necessarily, but the parties do run the risk that a court could determine that a “reasonable” compliance with the deadlines is sufficient, particularly if the parties have traditionally been somewhat lax when it comes to the contract dates and deadlines or if performance of contract duties do not directly hinge on an important date. While a time of the essence provision can be helpful, we typically advise our clients that if time is truly critical, more specific provisions regarding deadlines or dates be included, such as specifically lining out a “drop dead date” and the specific remedies available (such as termination of the contract or liquidated damages) in the event the deadline is not met.
Eric R. Thiergood, Sr.
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