FEATURES

IS TIME OF THE ESSENCE?

lf time is of the essence in a contract, then failure to comply
with the requirements of timing may have serious consequence.
Whether or not time is made of the

then, subject to the rest of the wording of

essence is an important factor when it

the contract, time could be made to be of

comes to compliance with or the

the essence.

enforcement of a party's contractual

obligations. What is meant by the phrase

'time of the essence' is that an obligation

has

The concept of time being of the essence

has recently been considered by the
Courts in two cases which provide good

to be performed by, or within, the

specified period. Should the party under

illustrations of the operation of the

the obligation fail to comply with the

provision.

specified time period it will be in breach

of contract. The aggrieved party will then

William Scott examines two

recent cases that shed light
on ths ssue
William Scott
Solicitor
William acts for
commercial, charity and
private clients advising
on all aspects of
disputes connected to

ldealview Ltd v Bello

property.

be in a position to terminate the

The first was the 2009 case of ldealview

agreement and, if appropriate, claim

damages. Where time is of the essence

Ltd v Bello in which the High Court

then strict compliance is a necessity and

considered, on appeal from the County

even being a matter of hours beyond the

Court, the question of time being of the

'What is meant by the phrase

deadline will result in a failure to comply.

essence in relation to rent review clauses.

"time of the essence" is that an

obligation has to be performed by,

Unfortunately the judgments of both the

The general presumption is that time is

County Court and High Court were

not normally of the essence in a contract.

hampered to a certain degree by the

Howeve it can be made so either expressly

failure of the respondent to raise the

or it can be implied from the terms of the

issues in the original rent review

contract or from the parties' conduct,

arbitration. Strictly speaking both Courts

or within, the specified period'

should not have considered the points

ln relation to property transactions, time

raised by the respondent, although both

being of the essence is an important

found against the respondent in any

factor when it comes to break clauses and

evenI.

rent reviews. Break clauses always specify

a break date and then require notice to be
given of the intention to break the lease
by the break date.

me

is of the essence

with regard to the service of the notice, as

generally this

will be at least six months'

Mr Bello took an assignment of the lease

in question in 2005, the reversion to
which was purchased by ldealview in
March 2006. Mr Bello had bought the
lease at auction, the sale of which was

notice or exactly six months' notice. lf the

subject to the outstanding rent review,

former, a break notice that gives notice of

which should have been settled as at 25

six months less one day will be invalid

March 1994. The lease provided that if

and the tenant will be held to the terms of

the revised rent had not been agreed by

the lease for the duration of the lease

25 December 1993 then the matter could

lf it

be referred to arbitration. Mr Bello raised

is the latter, then only exactly six months'

two arguments before the Court, the first

term (subject to a valid assignment).

notice will suffice. A day either way will

being that the arrears were statute barred

invalidate the notice.

as they were for a period

of 13 years and

hence in excess of any period of

lf

a contract states

that an obligation

must be complied with by a certain date,

limitation. The second argument raised

was that on the construction of the rent
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FEATURES

review clause

it had made time of the

second payment late and commenced its

essence and hence the landlord was out

own proceedings against the respondent

of time to imolement the rent review,

for breach of contract.

The general rule with rent review clauses

The Court held that on the construction of

is that time is not of the essence. As

the contract time was not of the essence

such, a landlord is entitled to implement

and the respondent was in breach of the

a rent review clause many years after the

contract rather than the claimant. The

actual rent review date, and in this case

agreement did not expressly state that

the Court held that the landlord was

time was of the essence. 0n the facts the

entitled to do so 13 years after the actual

Court could not imply that time was of the

review was due to have taken olace.

essence because, although the payments

were linked to certan events occurring,

Dominion Corporate Trustees Ltd and

comoliance was not vital for the

others v Dehenhams Properties Ltd

performance of the contract. The failure

on the art of the claimant to make the

The second case (from 2010) is Dominion

second payment on time did not deprive

Corporate Trustees Ltd and others v

the respondent of substantially the whole

Debenhams Properties Ltd in which the

of the benefit of the contract. In addition

High Court considered whether time was

the respondent was still able to perform

of the essence in connection with

payment under a lease. The claimant in

its obligations under the contract despite

the late oerformance of the claimant in

this case owned a shopping centre, to

making the second payment. The Court's

which it had agreed to build an extension.

view was that it could not be imolied into

The respondent was to carry out certain

the contract that time was to be of the

fitting-out works in one of the units in the

essence.

new extension, after which it would enter

into a lease of the newly fitted-out shop.

Conclusion

The claimant was to make a contribution

to the cost of the fitting-out works of

ln light ol these cases it is clear that in

900,000, payable to the respondent in

order for time to be of the essence

stages. The payments were linked to

best to include in any contract express

certain events such as the exchange of

wording to such effect. To imply that time

it

is

will require sufficient

contracts, the construction of the unit and

is of the essence

the opening of the unit for trading by the

wording n a contract to suggest that that

resDondent.

was the intention of the parties and the

obligation needs to go to the heart of the

FIND OUT MORE

lf you

have any concerns about the

The first payment was made on time but

contract. The failure to comply with the

the second payment was not. The

obligation needs to esult in either a

respondent then purported to terminate

substantial loss to one party or to deprive

the contract on the basis that time was of

it of substantially the whole of the benefit

the essence in relation to the payments

of the contract.

and therefore the failure to make the

the essence in respect of a contractual

second payment amounted to a breach of

obligation and a party fails to compl the

lf it is held that time is of

contract, entitling the respondent to

remedy is repudiation of the contract and

terminate the contract and retain the first

a claim for damages. With this in mind

payment. The claimant took the position

parties are well advised to consder

implications of time being of the

that time was not of the essence and

carefully before agreeing that time will be

essence in a contract, please contact

therefore the resoondent had breached

of the essence in relation to any term of a

the contract by refusing to accept the

contract.

your BWB advisor,

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