(m) Time is of the essence

The qualification as breach of contract should be preceded by (or happen concurrently with) the default of a party. Whether a party is in default is not always clear: obviously, if the party must deliver a work or product that will be used for the Olympics, then an agreed deadline is unequivocally triggering the default when delivery does not take place by then. Many contracts do not relate to the Olympic Games.

A provision that ‘time is of the essence’ is sometimes included to emphasise that the debtor is in default upon its failure to meet a certain deadline for delivery. A fairly imprecise clause is:

Time is of the essence. Supplier shall adhere to the time schedule in the Statement of Work. All dates specified in the Statement of Work are of the essence, unless the context clearly and unequivocally allows otherwise. The Parties will notify each other promptly of any circumstances that may adversely affect the time schedule in the Statement of Work, specifying the causes of delay and expected duration of it, as well as all proposed measures to reduce the delay as much as practicable.

Where all delivery dates are identified to be of the essence, it is prossibly nothing more than a superfluous statement. Whether or not in the particular circumstances a timely delivery is indeed ‘of the essence‘ is rather a factual question and subject to qualification by operation of law. Of course, in a commercial services agreement agreed in the context of a larger project, meeting the contractual milestones may well be essential. It is recommended that you ensure that this is understood from other facts than a boilerplate provision. In common law jurisdictions time is of the essence often means that delayed performance permits the affected party to terminate the contract.

A useful element in the same provision is the agreed remedy in case a delivery date cannot be met. In ongoing relationships, the persons involved will contact each other and explain regardless. Without a contractual remedy, however, it may well be more difficult to be notified promptly, let alone to require a collaborative approach from the defaulting party.