Are “Time is of the Essence” Provisions in Contracts Enforceable?

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Are “Time is of the Essence” Provisions in Contracts Enforceable?

Sometimes parties to a contract — especially those involving the sale of goods — will include a “time is of the essence” (TOE) provision to signify that delivery deadlines are crucial to the performance of the contract.  This is often because there are other critical factors that are dependent on an on-time delivery — for example, stores that need to be stocked in time for a holiday sale or a lucrative business opportunity that rests on a timely delivery.

Some parties may be surprised to know that a missed deadline does not always mean a contract has been breached.  When it comes to some contracts, courts will often not consider timing to be essential.  Minor deviations from a contract’s schedule may not be considered important enough to terminate the contract or award damages. 

However, to those who depend on contract schedules being met, a TOE provision makes it clear that it is vital for these obligations be performed on time.  A delay could become grounds for cancelling the contract or suspending performance.  The types of contracts that typically include a TOE provision are those where performing a duty after a stated deadline would make the performance less valuable or useless.  These can include:

  • Real estate contracts
  • Construction contracts
  • Delivery services contracts
  • Entertainment/performance contracts
  • Publishing contracts
  • Food/catering contracts
  • Rental contracts

If a contract does not contain a TOE provision, it is generally assumed that timing is not an important factor. 

Even if the contract has a TOE provision, however, a breach may not be considered material if there are little or no damages. The breaching party may have an opportunity to cure the breach; a good faith effort to do so can avoid liability.  If the party fails to cure the breach, it can be held liable for losses caused by the delay.  If the delay was intentional or involved tortious actions, the breaching party could be held liable for punitive damages as well.

Williams Commercial Law Group, L.L.P., has the experience and reputation that you want when you are dealing with a business-related lawsuit. We are here to obtain the best possible outcome for your situation. Do not hesitate to contact Williams Commercial Law Group, L.L.P., at (602) 256-9400, and see how we can help you resolve your legal matter.

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