Why Use a 'Time Is of the Essence' Provision in Contracts?

Timing is everything, especially if there is a “time is of the essence” provision in your contract.

Most people enter into a contract with the understanding that performance will occur within a specific time frame. When performance is delayed, people tend to look to the terms of the contract for recourse. And if they find specific language making it clear that time does matter—that “time is of the essence”—then delayed performance of the particular or general contract terms will likely result in a material breach of the contract. This essentially allows the non-breaching party to terminate the contract.

In a subcontract, for example, the general contractor may specify a completion date and include the “time is of the essence” provision. If the subcontractor does not complete his work on or before the completion date, the general contractor may choose to terminate the subcontract, hire another subcontractor to complete the job, and sue the original subcontractor for breach of contract.

If a contract doesn’t include such a “time is of the essence” provision, a delay will not be considered a material breach so long as performance is effectuated within a reasonable time. Even a “time is of the essence” provision can be waived if the parties continue their dealings regardless of late performance. In that case, courts will tend to not enforce termination of a contract. But be aware that simply granting extensions to perform will not necessarily constitute a waiver. In that instance, to preserve your “time is of the essence” provision, it’s advisable that you grant extensions in writing expressly noting that the defaulting party is still in breach of the contract. In that way, when you’ve had enough of the delays, you can still choose to terminate the contract.

Be mindful of “time is of the essence” provisions—they’re not just generic contract provisions but are useful tools to enforce performance dates.

Alexander Barthet ([email protected]) is a principal of The Barthet Firm, a 12-lawyer commercial law practice focusing on construction-related matters.

This article is for informational purposes only. It is not intended as legal advice. Consult an attorney before taking any action.