Importance of the Phrase ‘Time Is of the Essence’ in Commercial Contracts in England

If your commercial contract contains a clause stating that time is of the essence, you must meet this requirement. These clauses specify 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 paying damages. This article will explore 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?

These provisions attempt to ensure the other party to the contract performs a specific task by a particular time. They usually stipulate that failure to do so will constitute a breach of contract. Most time is of the essence clauses will go further and state that, upon any material breach of the clause, the business can terminate the entire contract and seek damages.

Due to the time-related purpose of these provisions, courts tend to enforce the time periods. This is because the clause specifically clarifies that performing the task after a specific date is redundant.

Notably, judges do not differentiate between a 1-minute delay as opposed to a 10-minute or 10-hour delay. All will likely constitute a breach of contract and permit a business to terminate the agreement and seek appropriate damages.

Example

Let us explore a quick example.  

Your business is a local leisure centre. Recently, you have refurbished the grass 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 a contract with a sports equipment supplier to supply 50 junior-size footballs. Within the agreement, your business clarifies in a ‘time is of the essence’ clause you require delivery the day before the Junior Football event. Otherwise, the purpose of the contract is lost, and your business will have to refund all potential takings.

The footballs do not arrive on time, and they reach you a week late. By that point, your business had to cancel the event. Additionally, you must refund all customer money and waste the money spent on advertising the event. Consequently, the failure of the event negatively affects your business’s reputation.  

However, due to the contractual deadline within the ‘time is of the essence’ clause, your business can claim a breach of your contract. This will allow you to return the footballs to the other company and demand a refund. Additionally, you can also request damages for loss because of breaching the contractual term. On the whole, you may obtain monies to cover the lost revenue and advertising costs.

Key Takeaways

A ‘time is of the essence’ clause can prove helpful where you require a service or delivery by a specific date. It clearly clarifies the consequences of failing to meet that date to the other company. 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 a reasonable time, so wish to end the contract and obtain damages. In short, the time limits within this type of clause should be taken very seriously. Otherwise, the defaulting party will owe 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.

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