Time is of the Essence Overview

The time is of the essence clause in construction contracts is a contract clause often found in construction contracts that holds a party responsible for completing an agreed upon task in an agreed upon time. The time is of the essence clause can have the effect of making what would normally be a minor delay result in a material breach of contract.

A material breach of contract is a serious matter, much more so than a minor breach of contract. When a minor breach occurs, the victim can still recover the loss that the breach has induced and the breaching party may still fulfill their side of the contract.

When a material breach of contract occurs, however, the aggrieved party may break off the contract, and the party that caused the breach will lose the contract and be deemed liable for any penalties related thereto.

Therefore a time is of the essence clause is one which is not to be ignored, and one which it is advised to be as educated on as possible.

Time is of the Essence Explained

Although a time is of the essence clause is not one to be ignored, there is some room for debate where it is concerned, and whether or not untimely completion in fact will warrant contract termination and possible penalties can depend on a number of factors.

For instance, even if the language of the contract does not contain a specific call for time being of the essence, a court may rule that the party’s communication and conduct clearly implied that time was of the essence, thereby making a de facto agreement that time was in fact of the essence.

That said, contractors working to fulfill a time is of the essence clause can also find favor with the courts, as the Arizona Supreme Court has judged that time is of the essence should not always be strictly enforced, such as if the untimeliness of a contracted task is trivial in nature.

Specifically, the Arizona Supreme Court ruled that if the untimely performance of a task does not cause damages to the contracting party, time cannot truly be considered to be “of the essence,” regardless of the language of contract.

Nonetheless, where time is of the essence is concerned, it is best not to leave things to chance, or the courts, but carefully consider both the language of any contract presented and any actions of the contracting party that might imply that time would be of the essence.

To that end, the following are indicators that time might be considered of the essence:

  1. The specific term “time is of the essence” is in the contract.
  2. The contracting party insists on completion of some task by some specific time.
  3. The contracting party requests that you apply more resources toward completing the contracted task by a specific time (as this would indicate that time is of the essence).
  4. That you as the contractor have promised to finish a task by a specified date.
  5. That the contracting party will suffer some manner of damages if the contracted task is not finished by a certain date.
  6. That the contracting party intends to use a relevant property at a certain date.

Time is of the Essence for Construction Contracts

Insofar as construction contracts are concerned, most parties involved in such contracts, and the projects related to them, expect that the contracted work will be finished by a certain time. If this does not happen, the aggrieved party tends to refer to the contract for any recourse.

If the language in the contract clearly states that time is of the essence, then a delay that breaches such a clause will most likely be considered a material breach of contract and the contracting party will be able to terminate the contract.

Such a clause is also applicable to subcontractors, where if the subcontractor does not honor the time-is-of-the-essence clause specified by the contractor, the contractor can then terminate the agreement with the subcontractor, hire a replacement, and then sue the first subcontractor for breaching their contract.

However, even though it might seem as if time is of the essence would be implied in the construction industry, delays are generally not considered cause for a material breach of contract as long as the task contracted is finished within a reasonable time or without material damage being caused to the contracting party.

Also, the time is of the essence clause can be waived if the contracting party so chooses, but one should not simply assume this will occur, and the granting of a time extension does not constitute a legal waiver.

So, for these reasons and more, it is important to pay special attention to time is of the essence clauses. They are not generic provisions of contracts but rather tools of performance enforcement that can have serious consequences if breached.

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