Parties to a contract often include a statement that says "time is of the essence." What does this provision mean, and will a court always enforce a "time is of the essence" clause if something goes wrong under the contract? Read on to learn more. (For a look at other kinds of clauses that show up often in written agreements, read Nolo's article Common Boilerplate Provisions in Contracts.)
Why Is "Time is of the Essence" Language Needed?
If the other party to a contract does not perform its obligations on time, you may find yourself late for a very important date, much like the White Rabbit in Alice in Wonderland. Parties to a contract are sometimes surprised to learn that missing a contractual deadline does not always amount to a material breach of the contract. (Learn more broken agreements in Nolo's article Breach of Contract: Material Breach.) When it comes to many types of contracts -- for example, construction, real estate sales, loans, or other non-goods contracts -- courts often don't consider timing to be essential. They believe that minor deviations from a contract's schedule aren't important enough to warrant damages or termination of the contract. In some circumstances, however, the parties would beg to differ. For example, the timing of a loan contract may be very important indeed, if the lender's failure to fund the loan on time means that you can't buy a house or pursue a lucrative business opportunity. For that reason, lawyers began to use "time is of the essence" provisions in contracts. When a party wants to make sure that the agreement makes it clear that it is important that the contract obligations be completed on time, a contract can include a provision that specifically states: "Time is of the essence with respect to all [obligations/deliveries/payments] under this Agreement."
Will "Time is of the Essence" Provisions Be Enforced?
The modern view held by most courts is that a party's failure to meet the conditions of a "time is of the essence" provision amounts to a material breach of the contract. And, alternatively, most courts will not consider the timing as crucial if this language is left out. However, even when a "time is of the essence" clause is included in a contract, a court may give the breaching party time to cure (fix) the breach, or may even disregard the provision completely if other evidence indicates that it would be unfair to enforce the "time is of the essence" clause or shows that the parties really didn't intend for the contract to be terminated over a missed deadline.
Sale of Goods and "Time is of the Essence" Provisions
In contracts for the sale of goods, courts consider delivery dates to be very important. A seller's failure to hit a delivery date is usually considered a material breach of the contract even without a "time is of the essence" provision. That's not the case when it comes to the date for paying for the goods, however. Courts give the parties more leeway to miss payment dates because a late payment can always be addressed by charging interest on the amount due.
For more tips on getting your agreement in writing, read Nolo's article Contracts 101: Make a Legally Valid Contract. If you're looking for an A to Z guide to everything you need to know about contracts, get Nolo's new book Contracts: The Essential Business Desk Reference, by attorney Rich Stim.