Table of Contents
In Short
- “Time is of the essence” clauses make timely performance a critical contractual obligation.
- Failure to comply can result in breaches and legal consequences, including termination or damages.
- These clauses emphasise the importance of meeting deadlines in commercial contracts.
Tips for Businesses
When drafting contracts, consider including “time is of the essence” clauses to ensure adherence to important deadlines. Clearly communicate these timeframes to all parties involved. Be aware of the legal implications tied to these clauses and consult with legal professionals to ensure your contract accurately reflects your business needs.
If your commercial contract contains a clause stating that time is of the essence, you must fulfil your obligations according to the specified timelines in the contract to avoid being in breach of contract. These clauses emphasise the importance of a party performing a specific obligation by a specific time. It is essential to pay heed to such clauses, as a breach may result in contract termination and liability for damages to the other party. This article examines what a ‘time is of the essence’ clause is and why it is important in your commercial contract.
What is a ‘Time is of the Essence’ Clause?
A ‘time is of the essence’ clause attempts to ensure that a party to the contract performs a specific task by a particular time. It may stipulate that failure to do so will constitute a breach of contract. Most ‘time is of the essence’ clauses state that upon any material breach of the clause, the non-breaching party can terminate the entire contract and seek damages from the breaching party. However, the law will imply this even if the contract does not state it explicitly.
Due to the time-related purpose of these provisions, courts generally enforce the time periods agreed upon between the parties.
Notably, judges typically do not differentiate between a 1-minute delay and a 10-minute or 10-hour delay. All may constitute a breach of contract, permitting a party to terminate the agreement and seek appropriate damages. You should note that not all contractual deadlines automatically create ‘time is of the essence’ clauses; the contract must clearly express this intention.
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Example
Your business is a local leisure centre. Recently, you have refurbished the grounds and converted the outside space into a football pitch. You announce a ‘Junior Football’ day in 4 weeks to increase revenue. This involves social media advertising, hiring a football coach, and printing physical leaflets.
Simultaneously, you enter into a contract with a sports equipment supplier to supply 50 junior-size footballs. Within the agreement, your business specifies in a ‘time is of the essence’ clause that you require delivery the day before the Junior Football event. Otherwise, your business will lose the purpose of the contract and will need to refund all potential takings.
However, due to the contractual deadline within the ‘time is of the essence’ clause, your business can claim a breach of the contract. This will allow you to return the footballs to the supplier and demand a refund. Additionally, you can request damages for any loss resulting from a breach of the contractual term.
On the whole, you can recover money to cover lost revenue and advertising costs; however, the contract may limit this if it includes a consequential loss exclusion. This example illustrates how a ‘time is of the essence’ clause can protect businesses from significant losses due to delays, especially in critical industries or event-based contracts.
Continue reading this article below the formKey Takeaways
A ‘time is of the essence’ clause can prove helpful where you require a service or delivery by a specific date. It clearly outlines the consequences of failing to meet that date to the other party. Furthermore, it motivates them to perform the task within the contract and prioritise it against other tasks. Where there is a breach of the clause, your business has the option to inform the breaching party that they have failed to deliver the goods or service within the specified time, and end the contract and claim damages. In short, you should take the time limits within this type of clause very seriously. Otherwise, the defaulting party may be liable for financial damages.
If you need help drafting ‘time is of the essence’ clauses, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
While this is not common, both parties can agree in writing to change the date. This usually happens when the services relate to a particular event (such as a wedding) and the event date has changed.
Many of these clauses require you to deliver goods or services by a specific date. Without timely performance, they tend to lose their value to the business. An example would be a company that delivers perishable goods late, so they are not in a suitable condition to sell.
In most cases, the contract must explicitly state a ‘time is of the essence’ clause for it to be enforceable. However, when the nature of the contract makes timely performance clearly essential, courts may treat time as of the essence even without an express clause. To avoid any doubt, always state clearly in the contract if timely performance is critical.
A ‘time is of the essence’ clause should be as specific as possible, clearly stating the deadline and the consequences of missing it. Vague or ambiguous clauses may be less enforceable. It is best to include precise dates, times, and a clear definition of what constitutes a breach.
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