Understanding the 'Time Is of the Essence' Clause in Contracts

If you’re trying to save on legal fees when negotiating contracts, there are some terms you need to know to make sure that you’re protected.

When you enter into a business relationship, even if you think you’ve made it clear you want the project completed in a timely manner, if you haven’t included a “Time Is of the Essence” clause in the contract, you may not be legally covered. In fact, in most contract situations, and that includes the manufacturing, construction, and real estate industries, courts typically rule that time is not of the essence unless it’s explicitly stated so in the contract.

If you have a deadline you expect to be met, you must state that in the contract and include some form of the phrase “Time is of the essence with respect to all the provisions of the Agreement.” Then make sure you include what you deem is a reasonable time to get the work done and set specific dates for completion. Without a “Time Is of the Essence” clause, the courts will permit the party to complete the work in what is considered a reasonable time.

By including the clause in the contract, if the work isn’t completed on time, it will be considered a breach of contract. Essentially, time isn’t of the essence unless the contract specifically declares it is.