Updated October 26, 2020:

Time is of the essence clause in real estate contracts refers to a clause that requires one party in a real estate contract to fulfill his or her obligations within a certain time frame. If the party fails to complete the required task on time, it is regarded as a breach of contract. However, the enforceability of a time is of the essence clause can vary depending on its clarity, elaborateness, provision of notification, and other factors. 

What Does “Time Is of the Essence” Mean?

The term “time is of the essence” is commonly found in real estate contracts. Simply defined, it is a legal term that serves to remind all parties involved in a contract that time is running out. It is legally defined as a term in a contract stating that one party's successful performance within a certain time frame is needed to require performance from the other party. Inability to fulfill performance on time results in a breach of contract.

Nonetheless, a time is of the essence clause that is too broad may be seen as a punitive clause, making it unenforceable in court. As such, it is important to isolate tasks in the contract that are especially important to the completion of performance as a whole and indicate that the clause particularly applies to those tasks.

There are a number of performance items that are dependent on time, including the option time frame, delivery of documents, notices, termination methods, and the closing date. Every date in the contract is rooted in the execution date. Since time is of the essence, inability to meet those deadlines can have significant negative consequences, ranging from a breach of contract to much bigger legal consequences.

Basic Rules for a Time Is of the Essence Clause

The basic rules that apply to a time is of the essence clause are well-defined and include:

  1. Merely inserting a closing date in a real estate sales contract does not ensure that the date will be “of the essence.” As such, both parties are entitled to a “reasonable” postponement of the closing.
  2. An agreed “time is of the essence” closing date is enforceable. If a party fails to close on that day, it will be considered a breach of contract.
  3. The closing may be regarded as “of the essence” under special circumstances, even if the term “time is of the essence” is not present in the contract.
  4. If the parties do not make the closing “of the essence” or include it in the schedule date, one of them can select a new date and make it “of the essence” by giving unambiguous notice to allow the other party to close within a “reasonable” time.
  5. If a time is of the essence clause is breached, it can be remedied in a number of ways, including establishing specific performance requirements, retaining down payment, and forcing the transfer of title.
  6. A party's attempt to enforce a time is of the essence clause can be fairly prevented based on a conduct-evidencing waiver or oral agreement.

Generally, a real estate sales contract with the term “time is of the essence” makes it obligatory for both parties to complete performance within a specified time. Failure by any of the parties to do so will result in a breach of contract or possibly forfeiture of the down payment. In addition, if one party intends to make the time is of the essence clause apparent, failure to give the other party unambiguous notice will render any language indicating time is of the essence ineffective.  

Time Is of the Essence Letter

One party in a real estate contract may send a time is of the essence letter to the other party as a legal notice. The letter is usually sent following the passing of the tentative closing date stated in the contract. It provides the time, date, and place for the closing of the deal and states that failure to meet the requirement will constitute a breach of contract.

The party that sends the letter is required to allow the other party to comply within a reasonable amount of time. The letter must also be sent to all other parties involved, including real estate agents and lawyers.

If you need help with time is of the essence clause in real estate contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.