Time is of the Essence Clauses

Time is of the Essence Clauses

By William F. Cobb October 2, 2019 Posted in Community Association Law

If time is an essential part of your contract performance, a “time is of the essence clause” needs to be included.  The “time is of the essence” clause is not necessarily a “stock clause” but is intended to give a party an immediate right to cancel the contract if the other party is unable to timely perform.  No notice of default is required where a “time is of the essence” provision is included in the contract. Where it clearly appears from the contract that time is essential, courts will generally recognize the parties’ expressed intent.  However, trying to achieve this result by merely putting into the contract the words ‘time is of the essence of this contract’ will likely not be met with favor.  To give effect to such a cryptic provision requires identifying what performance at what time is a condition of which party’s duty to do what.

Parties insert the provision into their contracts without any realization of its significance.  A general provision that time is of the essence to all of the many promises for sundry performance, varying in amount and importance will likely result in a determination the clause is ambiguous and can result in a refusal by the court to apply the clause unless it can be shown to be clearly applicable to the contract requirement against which it is being sought to be applied.  An inclusion of the clause in the contract should also identify the performance or event to which the clause is directed.

Time is of the Essence ClausesA “time is of the essence” provision in an agreement can be waived by the conduct of the parties subsequent to the agreed upon performance or event date, generally by post-deadline communication or course of dealing.  However, be mindful that repeated extensions of the performance or event do not amount to a waiver of the clause, simply a new deadline for performance.  Patience and forbearance will not constitute a waiver.  Failing to include a “time is of the essence” clause will result in a “reasonable” time for performance standard. 

It is advisable to specifically identify the performance or event to which the “time is of the essence” clause is to pertain to avoid ambiguity in the contract document and to specifically alert the parties to the agreement what is intended with regard to the clause.  Enforcement of the clause is essential in the event of a default, as post-default activity can result in a waiver of the rights of enforcement of what was originally intended as an essential element of the contract. 

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