Time is of the essence

Boilerplate Anatomy™ Go Premium A “typical” time is of the essence clause: Time shall be deemed to be of the essence of the Agreement. view template Resources: commercial imperative | Verbiage | Look, I tried | The ultimate client Index: Click ᐅ to expand: Boilerplate Representations and warranties Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

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.

Thanks to the Law of Property Act 1925, Section 41, the rules at equity now apply in contract as well. Eheu.

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.

Time being not of the essence and rent review

We rarely foray into commercial leases, folks, but you may see written the rent review section of a commercial lease that time is not of the essence. These contracts written to protect the landlord, as they inevitably are, you may puzzle at this. This is to give the landlord the excuse to retrospectively increase rent if it neglects to at the earliest opportunity. It permits the landlord to backdate the increase, on the argument that, “well, time wasn’t of the essence, so I didn’t bother to set the new rent at the time, and am doing it now.” Commercial tenants are warned to be proactive about re-setting rentals, therefore, to deprive the landlord of such optionality.

This strikes the JC as crappy behaviour, all the same. If you don’t reset the rent at the time — or at least try to — then the rent delta for that missing period it ought to be your loss, and indeed would be on ordinary principles of waiver. Your increase would take effect prospectively.==See also==

• Law of Property Act 1925
• Fundamental breach (aka repudiatory breach) or contract