In today’s Freedom Friday blog and email newsletter, I’m continuing the short series on small business contracts which I started last week. I’m discussing some different issues that don’t come up often enough when I am asked to draft, review, or revise contracts for small business owners. In last week’s Freedom Friday blog and email newsletter, I talked about the different kinds of deadlines which should be in your small business contract. However, in this week’s Freedom Friday blog and email newsletter, I’m talking about a phrase that often used along with various deadlines, and that is, “Time is of the essence.” In today’s Freedom Friday blog and email newsletter, I’m answering the question, “Why should time is of the essence not be in your small business contracts?”
An important aspect of any contract is whether “time is of the essence”. This phrase, by itself, can create issues of contractual interpretation, but if paired with a hard deadline, the phrase can be quite powerful as any deadlines, dates, time frames, etc., are more likely to be strictly enforced if the agreement states “time is of the essence.” However, for example, if your contract requires goods to be delivered, or services to be provided, and you wish to impose a deadline for the same, you need to be very careful with using the phrase, “time is of the essence.” This is because, if the phrase “time is of the essence” is used without pairing it with a hard deadline, you are drafting a contract ambiguity. For similar reasons, you should not use the phrase “as soon as possible.”
On the other hand, because the entire circumstances are usually considered when applying the law or a contract to the facts of a real world situation, if the phrase “time is of the essence” is paired with a hard deadline, the party with the deadline is more likely to be considered in material breach of the contract because the phrase “time is of the essence” is paired with that deadline. While any contract with a hard deadline may be considered definitive as opposed to a target date, pairing a hard deadline with “time of the essence” may make an impression that the deadline is important enough for it to be strictly enforced by a court.
So, why should you not include “time is of the essence” in your contract? First, do not include this term in a vacuum, without pairing it with a hard deadline. More importantly, if you are negotiating a contract with a buyer of goods or services, you may wish to avoid “time is of the essence” if you need more flexibility in the completion of the project.
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