April 29, 2002

Why State "Time Is of the Essence?"

Holland & Knight Newsletter
Tara A. Scanlon

The boilerplate in most real property leases and contracts of sale or purchase states that "time is of the essence." This phrase may seem redundant when the lease or other contract contains specific deadlines for when the parties have to perform certain obligations, and sets forth an outside date for performance.

However, this simple clause is "magic language" without which courts in certain states will not strictly enforce deadlines in a lease or a contract for the sale of real property, and will infer that obligations such as the obligation to close may be performed within a reasonable period of time, using the stated deadlines merely as guidelines rather than absolute commitments.

For example, in Wendell W. Wood v. Elva W. Wood, individually and as executrix, etc., 216 Va. 922; 224 S.E. 2d 159 Supreme Court of Virginia, the court held that "Equity has established the rule that in contracts for the sale of real estate, time is not of the essence unless expressly stipulated in the agreement, or it necessarily follows from the conduct of the parties or the nature of the circumstances of the agreement." Sims v. Nidiffer, 203 Va. 749, 752, 127 S.E. 2d 85, 87 (1962). The intention of the parties, as demonstrated by their words and acts is a controlling factor. And, the intention to make time essential will not be inferred from the mere appointment of a date for delivery of the deed or payment of the purchase price. Morris v. Harrop, 152 Va. 127, [***7], 135, 152 S.E. 343, 345 (1930).

One may not always rely on deadlines in a lease or contract for the sale of real property without the simple phrase "time is of the essence as to the obligations of the parties under this agreement." Heavily negotiated, clearly articulated and mutually agreed upon deadlines can be nullified, despite the best intent of the parties during the negotiation process, without this simple but essential language.

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