When a contract contains a "time is of the essence" clause, it means:
Correct Answer
B) All specified deadlines are strictly binding and failure to perform on time constitutes a breach
A 'time is of the essence' clause makes all specified deadlines in the contract strictly binding on both parties. Failure to perform by the stated date — even by a single day — constitutes a material breach of contract, which may allow the non-breaching party to cancel the contract and seek damages. This clause is commonly included in Rhode Island purchase and sale agreements to enforce closing dates and contingency deadlines.
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Related Topics & Key Terms
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Related Concepts
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
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- → A Rhode Island licensee encounters a listing contract is drafted. What should the licensee remember?
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