Time - GMSLA Provision
2010 Global Master Securities Lending Agreement
Clause 24 in a Nutshell™
Use at your own risk, campers!
Full text of Clause 24
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Time is of the essence is a magic incantation that one puts into a contract to designate that, whatever else might go down, a party’s failure to comply with obligations within the stated time-frame is a fundamental breach justifying termination of contract, a plague upon your houses, apocalyptic horsemen on the ridge and so on.
Now at common law, time is — was — always of the essence. When any time is specified for the completion of an action, one party has an action if the other doesn’t performed by that time.
But as always, the dear old courts of chancery have to have their say. In equity, time is only fundamental to a contract if:
- it is expressed to be “of the essence”; or
- Otherwise, the circumstances indicate the time limit must be complied with exactly;
- Where neither of the above applies, but one party has been unduly delaysome, the other can give notice requiring performance within a reasonable time, therefore making time of the essence.
Grace periods and “the essence”
We have heard it argued that time being of the essence might override otherwise carefully negotiated grace periods. When challenged, the counsel in question was tongue-tied for a moment, before mumbling something about litigation over the Lehman administration but could not, ultimately supply any grounds, let alone actual authority, for this proposition. Time being of the essence means, more than anywhere, that one should assume the parties meant what precisely what they said. Here, one should pay exact attention to the time limits prescribed by a contract — including the grace periods so tediously injected into it — not ignore them.
- ↑ Or “time shall be of the essence”, or “time shall be deemed to be on or about the essence” — let your imaginations run wild.
- ↑ Parkin v Thorold (1852) 16Beav. 59.
- ↑ As we all know, the Lehman administration was, in the Harry Potter universe, a Horcrux and, in our own, charted a new portion of legal space-time where normal rules of Euclidean geometry do not apply.
- ↑ Please write in if you can think of one.