Time is of the Essence: Legal Meaning and Other Considerations

Time is of the essence provisions frequently appear in contracts. This phrase has an important legal meaning that you should understand before agreeing to the contract.

If a contract contains the provision that "time is of the essence" it means that every delay in performance of the contract is intended to constitute a material breach of the contract, thereby excusing the other party from its obligations under the contract. In construction, that can mean that if you are delayed in performing your obligations under the contract (even if there are reasonable reasons why the delay occurred, and sometimes even if the delays are outside your control), an owner or contractor may be excused from payment on some portion of the contract.

If you choose to enter into a contract that states that time is of the essence (or includes other penalties connected with delays), it is important to ensure that the timelines in the contract are timelines you can reasonably achieve. It is also important to ensure that the contract specifically protects you from being held in breach on the basis of delays outside your control. The contract should specifically address how the timeline may change due to change orders, discovery of unknown site conditions, weather delays, and so forth. It also is a good idea to include in contract what should happen if and when delays do occur, and establish procedures to allow for notice and cure, and reasonable caps on damages.