The expression “time is of the essence of the contract “ means that a breach of the condition as to the time for performance will entitle the innocent party to consider the breach as a repudiation of the contract.
Sec. 55 deals with the question of “time as the essence of the contract” and provides.
- When time is of the essence: In a contract, in which time if of the essence of the contract, if there is a failure on the part of the promisor to perform his obligation within the fixed time. The contract (or so much of it as remains unperformed becomes voidable at the option of the promise (Sec. 55 para 1). If, in such a case the promise accepts performance of the promise after the fixed time, he cannot claim compensation for nay loss occasioned by the non-performance of the promise at the agreed time. But if at the time of accepting the delayed performance he gives notice to the promisor of his intention to claim compensation, he can do so (Sec. 55 para 3)
In commercial or mercantile contracts which provide for performance within a specified time, time is ordinarily of the essence of the contract. This is so because businessmen want certainty.
Example: In a contract for the sale or purchase of goods the prices of which fluctuate rapidly in the market, the time of delivery and payment are considered to be of the essence of the contract.
- When time is not of the essence: In a contract, in which time is not of the essence of the contract, failure on the part of the promisor to perform his obligation within the fixed time does not make the contract voidable, but the promise is entitled to compensation for any loss occasioned to him by such failure (Sed. 55 para 2)
Intention to make time as the essence of the contract, if expressed in writing, must be in a language which is unambiguous and unmistakable. The mere fact that a certain time is specified in a contract for the performance of a promise does not necessarily make time as the essence of the contract. If the contract includes clauses providing for extension of time in certain contingencies or for payment of fine or penalty for every day or week the work undertaken remains unfinished on the expiry of time provided in the contract, such clauses are construed as rendering ineffective the express provision relating to the time being of the essence of the contract.
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