What does "Time is of the Essence" Mean?
Placing the clause “time is of the essence” into a contract makes the dates and time frames set forth in the contract extremely important. This clause requires the party to perform within the dates included. The failure to perform within the time frame may result in a breach of contract and any consequent repercussions that accompany this act.
Certain industries, including manufacturing, construction, and transportation, use time is of the essence clauses on a regular basis for transactional agreements. In these contracts, it is imperative that the party providing the service deliver within the dates set forth in the contract. If that party cannot deliver on time, then the other party may miss deadlines in other agreements.
Generally, contracts do not include this time sensitive clause. Most agreements assume that the parties will deliver the requirements set forth in the agreement within a reasonable time frame. A delay in completion of one of the items within the agreement by a few days is usually not an issue unless the agreement stated specifically that time was of the essence.
As the parties negotiate the terms of a transaction, they must decide if a delay of a few days is going to be an issue. If so, then the party requiring the specific date delivery will request a time is of the essence clause in the agreement. Generally speaking, the price to be paid by the party requesting the service may increase if this clause is included.
Costs in meeting the terms of an agreement often increase when there is a time is of the essence clause included. This is because both parties must meet specific deadlines regardless of any outside variables that might cause a delay. The increased costs may also be incurred if the party misses the deadline. It will either have penalties to pay or additional legal fees in defending itself for missing the deadline.
Given that the costs do increase in transactions with this clause, both parties must be certain that it is necessary in the agreement. It is not a clause that may be placed into an agreement without some discussion, as it considerably changes the way the transaction is to be completed. Both parties must agree to the specific wording of the clause so that they know what relief is to be granted in the event of a missed deadline.
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