Time is of the Essence and Contract Performance

Contract performance is on one of the main sources of contract disputes, i.e., situations where there is late performance of the agreed upon terms, no performance, or performance that does not adequately match the contract terms. Generally, one party’s minor delay that does not significantly impact the overall contract or cause a material breach will constitute “substantial performance” and will not relieve the other party from performance. It is important to note, however, that California law enforces “Time is of the Essence” clauses. If a contract has this clause and the contract has not been performed on the agreed upon date, there will be a breach of contract and the other party may be relieved of performance obligations.

A Time is of the Essence clause is a term in a contract that specifies a certain time or date that the contract performance has to happen.  It emphasizes that the times and dates specified in the agreement are vital and material to the contract.

A Time is of the Essence clause is enforceable under California law as long as it is fair and stated “expressly” and “unequivocally.”  Bisno v. Sax, 346 P.2d 814, 721 (Cal. Ct. App. 1960).  The non-breaching party has the option to either withdraw from the contract or ask that it be upheld so they can sue for damages.

In many types of contracts, especially those involving real estate, construction, real estate sales, or other similar service transactions, California courts will probably find that timing was not essential. Usually, a court will not award damages or terminate a contract just because there were minor deviations such as a short delay in performance. Notably, courts consider performance dates more important in contracts for the sale of goods.

If you are drafting a contract and the performance date is materially important, make sure to  include a Time is of the Essence clause. Keep in mind that, depending on the circumstances, even when a Time is of the Essence clause is in a contract, a court may give the breaching party an opportunity to fix or “cure” the breach before awarding damages or terminating the contract.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and contract claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

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