(i) 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, however. Obviously, if the party must deliver work or a product that will be used during the Olympics, then a stipulated deadline unequivocally triggers the default if delivery does not take place by the specified date. But many contracts do not relate to the Olympic Games.

Default. 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 example:

Time is of the essence. Supplier shall adhere to the time schedule in the Statement of Work. Each date specified in the Statement of Work is 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.

If all delivery dates are stated as being ‘of the essence’, the statement is probably superfluous because whether or not a timely delivery is indeed ‘of the essence’ is a factual question based on the circumstances and subject to qualification by the 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 facts other than a boilerplate provision such as the above example. 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 to include in the same provision is the agreed remedy in case a delivery date cannot be met. In on-going relationships, the people involved will contact each other and explain regardless. Without a contractual remedy, however, it may be more difficult to ensure that the defaulting party notifies promptly, let alone to require a collaborative approach from the defaulting party.