What is the legal effect of making time of the essence in a construction contract?
Making time of the essence can turn compliance with a stated time obligation into a condition of continued performance. The phrase must be construed within the complete contract and does not automatically govern every date it contains.
Where time is validly of the essence, failure to meet the essential date may entitle the innocent party to terminate, subject to election, waiver and the precise contractual terms
Time may be essential because the contract says so, because the transaction and circumstances require strict compliance, or because a valid notice fixes a reasonable final date after delay. Construction contracts commonly use extension-of-time and liquidated-damages machinery instead, which may indicate that late completion attracts time adjustment and damages rather than an immediate termination right. A general "time is of the essence" clause must therefore be reconciled with the completion, extension, damages and termination provisions. The innocent party may affirm the contract rather than terminate, and its conduct can affect the right relied upon.
| Issue | Position |
|---|---|
| Express essential date | Potential termination right if the condition is breached |
| Extension-of-time machinery | May indicate a different contractual consequence |
| Liquidated damages | Usually compensates delay rather than making every date essential |
| Notice after delay | Must fix a clear and reasonable final time |
| Post-breach conduct | May amount to affirmation, waiver or election |
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