When a contract includes a time is of the essence clause, any failure to perform by the specified deadline — even by one day — can be treated as a material breach, giving the non-breaching party the right to terminate the contract and seek remedies. Without this clause, courts may allow a reasonable time for performance beyond the stated deadline.
A purchase contract with a time is of the essence clause sets the closing date for April 15. The buyer's lender has delays and the buyer cannot close until April 17. Because of the time is of the essence clause, the seller can treat the two-day delay as a material breach and terminate the contract.
For the exam, understand that without a time is of the essence clause, courts typically allow reasonable delays. With the clause, deadlines are absolute. Remember that this clause must be explicitly stated in the contract — it is not automatically implied.
Related Terms
Related Concepts
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
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